The Market Monitor Minding the Nation's Business
By Riza Lozada
The Philippine Stock Exchange Inc. (PSE) plans to allow the trading of shares using the US currency and is now seeking comments and suggestions from bourse stakeholders on its draft rules on Dollar Denominated Securities (DDS).
The new securities product is intended for companies interested in listing dollar denominated shares in addition to their peso common shares.
“The introduction of dollar denominated securities listing in the Exchange is in line with our thrust of providing more products and services for the market. With this product, we want companies to have the flexibility of raising capital in dollars, while providing both foreign and local investors the ability to trade in the market without necessarily facing foreign exchange risks,” PSE President and CEO Hans Sicat said.
The proposed rules cover the listing and disclosure, trading, clearing and settlement, and fees of DDS. Under the proposed rules, companies who are already listed at the Exchange can issue a new set of securities, either common or preferred shares, which are quoted, traded, and settled in US dollars.
“We encourage our stakeholders to take part in this consultative exercise so that the rules we will put in place will be most suited to the requirements of the market,” Sicat added.
Allowing dollar trade is expected to perk up the current bearish market.
“There is demand both from an issuer perspective and from a funding perspective. There’s excess liquidity in the system, including maybe an untapped asset class for dollar holders in the exchange,” Sicat said.
The PSE, through the issuance of its DDS rules, targets investors with US dollar deposit accounts and to pull in offshore investors by reducing their currency risk exposures.
Amid market volatilities, the PSE posted a net income of P683 million in 2015, which was a 21 percent decrease from its net income a year ago.
Listing-related income, which made up 40 percent of operating revenues, went down by 41 percent year-on-year to P483 million.
While capital-raising activities for 2015 were higher, other listing activities arising from other market deals were slower compared to 2014. This decline was tempered by higher trading-related revenues, including service fees derived by the Securities Clearing Corp. of the Philippines, which grew by 2 percent.
Despite volatilities in the second half of 2015, the average daily turnover in 2015 managed to inch two percent higher at P8.9 billion compared to P8.8 billion in 2014.
Meanwhile, total revenues, including operating revenues and other income, went down by 15 percent to P1.4 billion.
“Last year was a challenging year not only for the Philippine stock market but to the global equities market in general. Our local market was not spared from the backlash of China’s economic slowdown and the US Federal Reserve’s decision to start gradually raising interest rates. These developments affected both liquidity and capital market deals particularly in the latter part of the year,” Sicat said.
“Volatility has persisted early in 2016, but we are hopeful that the country’s sound economic fundamentals will help temper these and will cause investors to continue having the Philippines in their investment radar,” he added.
As of Feb. 23, daily average turnover was down by 31 percent to P6.2 billion compared to P8.96 billion last year. In 2015, total expenses amounted to P602 million, up slightly by 2 percent. Investments made by the Exchange in its new trading system and its move to a new building contributed to the increased spending. The PSE is scheduled to transfer to the Fort Bonifacio Global City during the first half of 2017.“
A big part of the spending increase was due to investments that are being made by the company in line with its strategy of creating a bigger Exchange offering more products and services. Despite these, we were able to manage our expenses to help mitigate the impact of slower market activity in our financials,” Sicat explained.
“We foresee a potential increase in capital raising activities after the Philippine elections and we hope the volatility becomes more tempered as investors get more clarity on the impact of the global developments in our market,” he added.
While the rally of the PSEi ended in 2015, the index remained among the least adversely affected markets in the region.