MANILA, Philippines (Edited 1:04 p.m.) - The Philippine Stock Exchange index has recently been flirting with new all time highs, breaching the 8,000 mark which industry observers say may finally put an end to the dearth of initial public offerings (IPOs).
The stock market, while it continues to attract companies, has yet to see the return of the IPO fever of the 1990s or even prior to the 2008 global financial crisis when there were double-digit listings.
According to PwC Philippines, from 2008 to 2009, the Philippines only had two IPOs before they averaged four to five annually.
“In the Philippines, the IPO market peaked with 12 listings in 2007 before the global financial crisis struck in 2008,” it said.
In 1994, prior to the Asian financial crisis of 1997, the Philippines saw 21 companies go public.
But things may soon change, said PSE chief operating officer Roel Refran, as the exchange continues to lure private companies to go public or encourage listed ones to go back to the market.
This year, the PSE hopes to see at least eight or twice the number of companies list on the exchange.
Refran said IPO numbers in the Philippines have room to improve and that the PSE is stepping up efforts to encourage companies to go back to the market and those that are still in the informal sector to formalize and list.
Reggie Cariaso, BPI senior managing director and co-head for Investment Banking of BPI Capital, said companies would indeed soon find the need to go public.
“It is generally easier and more desirable to get debt financing because the banking system has been very liquid. However, over time and as companies grow, I believe more and more of them will reach a stage where doing an IPO and accessing the equity capital markets will become more compelling,” he told The STAR over the weekend.
Astro del Castillo, managing director of First Grade Finance Inc. likewise said the lull in the IPO market the past years may soon change.
He said the lull can be attributed to the fact that many of the big companies have already listed. These include blockbuster IPOs such as the Lopez Group’s ABS-CBN and San Miguel’s Petron Corp.
“But the PSE is bent on inviting more so we will see more companies go public. In time, they will see the need for it especially with ASEAN integration,” Del Castillo said, referring to the integrated economic bloc of the 10-member ASEAN.
For Peter Lundgreen, CEO of Denmark-based investment advisory firm Lundgreen Capital, the trend is not just in the Philippines, saying that the slowdown in IPOs is global.
“We have a lot of concentration in the private equity sector. IPOs always seem interesting but there are not enough attractive investment opportunities. The dynamic in all economies has slowed down and not generating opportunities for cash-rich investors. You can easily sell off an asset but the problem is you don’t know where to put the money after you get the money,” he told The STAR in a recent interview.
He said the Philippines needs to attract more domestic investors so it wouldn’t rely too much on foreign funds.
“If you look at the Philippine stock market in the past two years, it was evident there was a lot of capital inflow from the US. Is there investor demand for IPOs in the Philippines? It needs to come from domestic investors,” he said.
So far, companies that went public this year are Wilcon Depot Inc. (P7 billion); Eagle Cement (P8.6 billion) and Cebu Landmasters Inc. (P3 billion). Others in the pipeline include Chelsea Logistics Corp. (P8 billion); Audiowav Inc. (P2.7 billion); Pure Energy Holdings (P1.5 billion); Xeleb (P736 million) and The Big Chill (P500 million to P600 million).
For his part, PSE president and CEO Ramon Monzon said the PSE continues to lure investors to park their funds in stocks.
He noted for instance the total number of stock market accounts — both online and traditional accounts — grew 8.5 percent to 773,187 last year from 712,549 accounts in 2015.
Online accounts alone went up 27.8 percent to 302,516 from 236,669 in 2015.
“The numbers show that more investors are finding out that participating in the stock market is actually an affordable investment,” Monzon said.