President Ferdinand Marcos Jr. will be inheriting from former President Rodrigo Duterte a capital market that is currently reeling from the impact of a combination of rising inflation and interest rates, and risks of a global recession and food shortage.
Data from the Securities and Exchange Commission show that the size of the equities market relative to the country’s gross domestic product is at 91.1 percent in May 2022.
It is also lower than the 93.26 percent in 2021 and 95 percent and 106.2 percent in 2016 and 2017, respectively, but higher than the trough of 85.6 percent in 2019.
However, the bond market has been continuously growing from 32 percent in 2016 to 50.58 percent in 2021. It stood at 52.21 percent as of May 2022.
In 2016, fresh capital raised at the Philippine Stock Exchange amounted to P227.25 billion, of which P176.8 billion were from initial public offerings.
The SEC said the amount of fresh capital raised from the capital markets (equities and bonds) hit a record high of P234.28 billion in 2021 mainly because of Monde Nissin Corporation’s initial public offering which raised P55.89 billion.
The figure was also boosted by the IPOs of several real estate investment trusts, the biggest contribution of the Duterte admnistration to the capital market as it finally ironed out provisions in the REIT Law’s rules which had made them unappealing to property developers.
The amount raised in 2021 will likely not be matched this year as capital raised amounted to only P20.6 billion as of May 2022. But the PSE said it has already raised P61.92 billion as of June 2022, 49.4 percent lower than in the first semester of 2021.
The amount of securities registered with the SEC is starting to recover after falling from a high of P418.93 billion in 2016 to its low of P144.06 billion and P130.05 billion in 2018 and 2019, respectively, Securities registered started growing again to P249.01 billion in 2020 and P365.13 billion in 2021. It amounted to P270.5 billion as of May 2022.
Increases in capital stock of Philippine corporations have also been recovering from P372.66 billion in 2020 to P687.4 billion in 2021. As of the first half of 2022, it stood at P280.84 billion.
The amount of investments in mutual funds has also been growing, from P294.7 billion in 2017 (lower in 2018 and 2019) to P362.9 billion in 2020 and P444.08 billion in 2021. As of the first quarter of 2022, it already amounted to P451.22 billion.
Moving forward, the SEC said it looks to sustain an oasis of accessible and efficient capital for Philippine businesses, including small and medium enterprises (SMEs), and startups.
To this end, the SEC has created the Office for the Advancement of Strategic Investments in SMEs (OASIS). It is charged with leading efforts to attain the Commission’s “888@88” target, that is, by the 88th anniversary of the SEC in 2024, 888 companies should have tapped the capital market for corporate financing or capital raising.
These include crowdfunding portals, in both debt and equity markets, and companies with government-supervised franchises.
In addition, the SEC aims to simplify the capital-raising products and streamline the registration processes for SMEs and encourage the Investment Houses and other Financial Institutions to conceive and implement a SME-friendly underwriting and/or advisory program.
The SEC also intends to engage multilateral agencies such as the Asian Development Bank and International Finance Corporation in launching SME-focused investment funds.
It will also challenge the existing markets and intermediaries to update and upgrade their systems through the use of SME-responsive Fintech.
The SEC also plans to collaborate with other government offices and the private sector in developing the appropriate ecosystem for SMEs, both developmental and regulatory.