Fewer IPOs seen in 2023 as inflation, rising interest rates make investors uneasy
MANILA, Philippines — Expect companies to shy away from going public this year, as rising inflation and high-interest rates are keeping investors cautious.
That was the assessment of First Market Investment Corp. on Wednesday, as market conditions already compelled two Philippine companies to defer their initial public offerings in 2022.
“I would think that volume will be slightly lower this year than 2022 since inflation views tend to provide caution to issuers on equity and debt side,” said Dan Camacho, executive vice president and investment banking group head at First Metro.
The vaunted IPO of Enrique Razon’s Prime Infra Capital was deferred owing to market conditions. IT product retailer Upson International Corp, which owns Octagon Computer Superstore and Micro Valley, decided against taking their company public in 2022.
“More quality than quantity this year,” Camacho added.
Economic conditions, headlined by inflation and rising interest rates, could muddy the market’s sentiment.
Painfully-high inflation was a fixture in 2022. The public’s purchasing power was battered last year, as supply chain disruptions, expensive fuel prices, and a weak peso dampened the country’s recovery from the pandemic.
The Bangko Sentral ng Pilipinas hiked interest rates over seven instances last year, in a bid to tame consumer inflation. As it is, the central bank injected 350 basis points as interest rates currently stood at 5.5%.
Even as adjustments of the benchmark rate takes 12 to 18 months to seep into the domestic economy, this could crimp the country’s growth trajectory.
Vic Abola, an economist at the University of Asia and the Pacific, who was also present at the briefing, noted that inflation could go back to 7% this month and start its long-awaited easing. Rising interest rates could continue their ascent as the BSP has signaled another round of hikes.
“The highest it could go is 50 bps, it would pause at 25bps. It would not follow the US since the situation is quite different from ours,” he said.
The BSP, along with economists, expect inflation in the country to have peaked in December 2022 when it accelerated to 8.1%.
Despite those forecasts, the Philippine Stock Exchange witnessed nine companies take their fortunes public in 2022, a record considering that most of those companies listed on the Small, Medium and Emerging board.
The market also did a brief foray into bear market territory in September. This led investor sentiment into choppier waters towards year-end, as the PSEi shrank 7.81% in 2022.
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