Local investors are keeping the equities and fixed-income markets afloat as foreign fund managers fled amid the adverse impact of the pandemic on the economy, according to a capital market report.
The Philippine Stock Exchange said in a first-quarter report to the Capital Market Development Council chaired by Finance Secretary Carlos Dominguez III it is the local investors who propped up the equities and fixed-income markets this year.
It said trading in the equities and fixed-income markets remained robust in the first three months, with local retail investors accounting for 74.3 percent of stock market transactions as of end-March, up from less than 50 percent prior to the onset of the pandemic in 2019.
The PSE said retail investors accounted for 43.3 percent of the volume traded by local investors compared to just 18.2 percent in 2019 and 26.9 percent in 2020.
It also saw investor-related trading making up 59 percent of the total traded volume in the fixed-income market in the same period.
Dominguez said the increase in retail investor participation in both markets pointed to the trust and confidence of the public in the regulatory bodies that are tasked to keep their capital and investment returns safe.
“Let’s keep that in mind—the environment of confidence in the system. Regulators are so important to provide guarantees to investors and ensure them that they are not going to be cheated,” Dominguez told his fellow CMDC members during a recent meeting of the council.
PSE president Ramon Monzon said that despite the significant decline of foreign participation in the stock market to just 25.7 percent in the first quarter of 2021 from 55.5 percent in 2019 and 45.4 percent in 2020, the average trading volume still rose by 49.6 percent from 2020 up to the first quarter of 2021, “indicating that local investors have stepped up.”
The year-to-date average daily value turnover in the PSE as of end-March 2021 was P11 billion, higher than the average of P7.35 billion in 2020 and the P7.29 billion in 2019.
The month of January 2021 saw a daily value turnover of P11.04 billion, then went up to P12.35 billion in February and eased to P9.88 billion in March.
“Market liquidity is off to a good start. Trading in the first quarter remains robust. We have almost a 50-percent increase in value turnover. Retail investors are very active in the stock market at least in the first quarter of 2021,” Monzon said during the meeting.
Lawyer Benedicta Du-Baladad, former president of the Financial Executives Institute of the Philippines and SEC chairman Emilio Aquino co-chair the CMDC—a coordinating body tasked to facilitate the development of the Philippine capital market.
Philippine Dealing & Exchange Corp. president and chief executive Antonino Nakpil said the fixed-income or debt securities market also performed slightly lower in the first quarter compared to the same period last year, but investor-related trading made up 59 percent or P898 billion of the total volume of P1.5 trillion as of end-March.
SEC Commissioner Ephyro Amatong, a CMDC member, said retail investors kept liquidity high in both the fixed-income and equities markets.
National Treasurer Rosalia de Leon, also a CMDC member, attributed the growing number of retail investors in fixed-income securities to the measures that were put in place to make bonds accessible to small investors and the successful financial literacy campaigns of the Bangko Sentral ng Pilipinas, the SEC and the PDS Group.
Monzon said savings by retail investors who can neither travel nor spend more because of the pandemic may have been diverted to investments in the equities markets.
He said that capital-raising activities in the PSE also remained strong, with the year-on-year capital raised growing 116 percent from P19.24 billion in end-March 2020 to P41.63 billion in end-March 2021.
Among the companies that turned towards the equities market for their funding needs were DDMP REIT Inc., which raised P14.7 billion from its initial public offering; Cebu Air Inc., P12.5 billion from its stock rights offering; AC Energy Philippines, P5.37 billion from its SRO; and 8990 Holdings Inc., P3.7 billion from its follow-on offering.
Monzon said the capital-raising pipeline remained “robust” despite the COVID-19 pandemic, with several companies having filed applications for an IPO or expressing interest in setting up their own real estate investment trusts.
Nakpil said the secondary fixed-income market trading was active despite the rise in the benchmark interest rates, particularly in the 10-year Philippine Treasury Bond yields which rose from 3 percent in January to 4.5 percent in March 2021, in line with a similar trend in US 10-year Treasury yields.
For primary issuance activity in the corporate bond markets, Nakpil said that in the first quarter, new bond listings reached almost P59 billion, but due to the number of maturing bonds in the same period, the overall amount of listed bonds of P 1.45 trillion was lower than at year-end 2020’s P 1.47 trillion.
Among the securities listed in the first quarter were SM Prime’s P10-billion fixed-rate bonds, Chinabank’s P20-billion FRBs and Rizal Commercial Banking Corp.’s P17.87-billion ASEAN Sustainability Bonds.