January 24, 2018, 9:38 am
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PH capital markets need to be more inclusive, innovative

The Philippine capital markets may have had significant developments over the years but remain relatively small compared to other emerging economies in Asia. 

In a span of five years, Philippine corporations have already raised over P1.7 trillion from around five to eight initial public offerings (IPOs) and 10 to 15 corporate bond deals a year. 

Retail investors have also stepped up especially for local equity and fixed income deals and now account for 50 percent to 70 percent of the volume, compared to previous years where institutions take up around 60 percent to 70 percent.

 Although the scenario has gotten better, the number of IPOs and bond issues in the country still pale in comparison to other emerging economies in the region. 

And while participation from retail investors has increased, most of the investors are coming from the more affluent retail, leaving a huge untapped market such as the OFWs and the unbanked sector. 

The challenge, according to BDO Capital and Investment Corp. president Eduardo V. Francisco, is to make the local capital markets more inclusive, enabling the ordinary man on the street to invest in stocks and bonds. 

Speaking before capital market participants during the recent Euromoney Philippine Investment Forum, Mr. Francisco emphasized there is more to increasing financial literacy in the country to achieve inclusivity and be able to make the local capital markets at par with that of developed countries. 

One of the solutions, he suggested, is not only to digitize but also to rid of too many touchpoints for IPO or bond subscriptions as these are roadblocks to encouraging many to invest in the capital markets. 

He added subscribing to equities and bonds in the country is too cumbersome due to the numerous documents, forms, and IDs required. 

“Our Monetary Board, Securities and Exchange Commission (SEC), Philippine Stock Exchange are open to new ways to raise the number of investors and make it more available to the masses.

 We have seen them liberalize rules but we need to propose new products or solutions,” Mr. Francisco said. He added the Philippines should also look into new platforms and models from abroad which the country can adopt particularly innovative solutions that would minimize documentation.

“Foreign players with platforms abroad are welcome to bring it here.

Fintech solutions are also welcome and we can work with the regulators to get approvals,” he added. 

BDO Capital is a full service investment house wholly owned by BDO Unibank that provides securities underwriting and trading; loan syndication; financial advisory; and private placement of debt and equity, among others. 

BDO, the country’s biggest lender, continued to dominate the Philippine banking industry as it earned P20.4 billion in the first nine months of last year.

This is 5 percent higher compared to its earnings of P19.3 billion during the same period last year.

BDO is ranked as the largest bank in terms of total assets, loans, deposits and trust funds under management based on published statements of condition as of the first six months of this year.

The Henry Sy-led bank said the increase was due to “sustained growth in its core lending, deposit-taking and fee-based businesses.”

“With a strong capital base, solid business franchise and extensive geographic reach, the bank is well-positioned to take full advantage of the country’s growth opportunities and further strengthen its dominance in the industry,” BDO said in a statement.

The bank’s capital base stood at P294.7 billion during the first nine months, with Common Equity Tier 1 (CET1) and Capital Adequacy Ratio (CAR) both remaining comfortably above the current regulatory minimum under the Basel III framework at 13.4 percent and 15.1 percent, respectively.

On a normalized basis, BDO said net income would have grown by 17 percent “after excluding extraordinary items primarily related to the consolidation of the Bank’s life insurance business (BDO Life) in 2016.”

Asset growth was funded by the 15 percent hike in total deposits to P2.1 trillion, powered by the 20 percent growth in Current Account/Savings account (CASA), representing 73 percent of total deposits.

The bank remained prudent and set aside P4 billion in provisions even as gross nonperforming loan (NPL) ratio and NPL cover remained steady at 1.3 percent and 136 percent, respectively.

BOO has one of the largest distribution networks, with more than 1,100 operating branches and over 3,800 ATMs nationwide. It also has a branch in Hong Kong as well as 26 overseas remittance and representative offices in Asia, Europe, North America and the Middle East.

Last August, BDO issued $700 million in Fixed Rate Senior Notes under the bank’s Medium Term Note Program.

This was the second drawdown under the program following the $300 million issued in October last year.

The issuance was part of the bank’s liability management initiatives to tap longer-term funding sources to support BDO’s lending operations and general corporate purposes.
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