‘Credit upgrades will expand investor base in PH’

MANILA, Philippines – While the Philippines continue to benefit from the flow of funds looking for investment havens among the emerging markets, the much-awaited credit rating upgrades for the Philippines will further make the country more attractive to foreign investors, finance executives said.  

At a forum on Monday, June 18, executives of the investment banking arm of the Metrobank Group said more capital raising activities are expected in the second half of the year, which would benefit from a robust Philippine capital market, which in turn would get a boost when the much-awaited credit rating upgrades do come.

“When credit upgrade happens, it will open a new ball game for Philippine market as it will expand investor base for Philippines,” First Metro Investments Corp. (FMIC) senior vice president Justino Ocampo said.

The Philippines is currently rated one notch below investment grade by Fitch Ratings, while Standard & Poor’s Rating Services and Moody’s Investors Service rate it two notches below investment grade. A better rating translates to lower cost for the capital that companies and the government are eyeing to raise.

Capital raising

Currently, the local financial markets are benefiting from the liquidity in the financial system, largely due to the low interest rate regime.

Bank loans and corporate debt issuances have not been enough to absorb this liquidity, thus excess funds flow into equities and bond markets.

Ocampo said corporate issuances sustained capital raising activities from January to May. “The level of robustness has been sustained, noting that in 2011 there was a 50% growth and a 9% growth in capital raising. Bonds issuance increased to 62% from 49%, equity grew to 18% from 11% and new issuances from banks Tier 2/LTNCD came about this year cornering 8%,” he said.

FMIC president Roberto Juanchito Dispo noted that “corporate issuances are expected to bulge in the second half of 2012, particularly in the consumer/retail sector. A number of refinancing and M&A transactions are forthcoming. Retail bonds issuances, IPOs and follow-on offerings are also in the pipeline,” Dispo added.

FMIC has reset its equities market outlook with PSEi hitting 5,500-level by year-end from an earlier projection of 5,000-level. FMIC AVP Bede Gomez said the year-end target will be “driven by focus on infrastructure, consumer and tourism, gaming and tourism, plus mining, and due to low interest rates, higher consumer spending, strong earnings growth, and PPP implementation. Investors should stay invested and increase equities weighting,” he said. – Rappler.com