IT WOULD probably be an understatement to say that officials of the Philippine Stock Exchange were “hopping mad” over the decision of one listed firm—a market darling at that— to undercut the authority of the bourse by offering to sell shares without its approval.
In particular, Biz Buzz learned that PSE officials were upset that this company and its underwriter went to town telling the investing public that they would soon be able to subscribe to as much as P10 billion in preferred shares of this firm, an up-and-coming shopping mall operator whose operations are focused on so-called “second tier” cities that are not yet served by retail giants like SM.
The thing is, the preferred shares that this firm wanted to sell do not even exist yet.
According to a PSE official, this listed firm and its underwriter secured an approval from the Securities and Exchange Commission to sell what seemed to be “entitlements” to preferred shares once these were created or issued. In other words, a prospective investor would have bought not the actual preferred shares, but merely the “right to buy preferred shares” once these came into existence. It would be similar to investing in a “warrant,” which confers on the holder the right to buy an underlying security at a set price at a future date, but not the security itself—something that may not have been very clear to the investing public.
“The investors would be buying air, since these preferred shares don’t exist yet,” the PSE official said.
More importantly—since the underlying securities had yet to be created or obtain PSE approval— there’s a chance that investors would be left holding worthless pieces of paper if the bourse withholds its future approval for the shares for any reason.
So after investigating the issue, it turned out that the whole scheme was the idea of one particular investment house, which is the investment banking arm of a major, well regarded and generally conservative universal bank in the country.
To this day, some people familiar with the deal are still scratching their heads as to why this bank-based investment house ventured into such a “creative” and “adventurously structured” deal especially since its practices have long been in step with its parent financial institution —a white-shoe bank that has had a reputation for impeccable behavior for more than a century.
Our source tells us that this was not the first time this investment house got itself in trouble with the bourse. But the latest incident pushed the PSE to finally put its foot down, we’re told.
The result? A two-year ban on this investment house from engaging in business that has anything to do with financial products and services that involve the stock exchange. At a time when the parent bank of the investment house is adopting a more aggressive market stance, a PSE ban of this duration will surely hurt the bottomline. Ouch. Daxim L. Lucas
Market darling Digong
LOCAL and foreign businessmen and investors have been closely monitoring the performance of Philippine financial markets in the days immediately after last Monday’s presidential elections where Davao City Mayor Rodrigo Duterte emerged the runaway winner.
But none were monitoring it as closely as the presumptive President-elect’s inner circle perhaps, more specifically the members of his economic team. And rightly so, because there were jitters among investors in the days leading up to the elections, resulting in an eight-day decline in stocks and also weakness in the peso-dollar exchange rate.
But those uncertainties seemed to have melted away by the end of the trading week last Friday.
Cheering the peaceful conduct of the elections, investors bought up local stocks, sending the Philippine Stock Exchange index (PSEi) rising by almost 445 points in an abbreviated trading week, or a gain of 6.27 percent. Talk about emphatic.
What’s more impressive is that the Du30 stock market phenomenon even edged out the 5.91-percent gain from a 188-point cumulative increase in the stock market in the week following President Aquino’s victory in May 2010, Aquino of course considered back then and now to be among the most investor sentiment-friendly chief executives this country has ever had.
All eyes are now on the first visit of Duterte to the PSE trading floor in Makati City to ring the opening bell —something that may happen as early as after he is proclaimed the official winner by Congress or soon after his inauguration on June 30.
As far as visits by the President to the PSE, it might not be too difficult to top the record of President Aquino: Three stock market declines on the three days that he had visited the bourse during his six-year term of office. Daxim L. Lucas
The next Senate chief
WITH the entry of a new batch of lawmakers at the next Congress, leadership in the Senate and House of Representatives is crucial in protecting the mandate of the next President, Davao City Mayor Rodrigo Duterte, who had won by a landslide vote.
A new coalition is seen to be formed in both chambers. It has been reported that the one most favored to become the next Speaker of the House is Davao Del Norte Rep. Pantaleon “Bebot” Alvarez, who has been endorsed by PDP-Laban.
In the Upper Chamber, a source from the emerging coalition said the next Senate President could be no less than Duterte’s running-mate Alan Peter Cayetano, who is a second-termer senator. After his defeat in the vice presidential race, Cayetano is believed to be a front-runner to be the next president of the Senate, the third most powerful political position in this country.
With such a realignment, the new ruling party under PDP-Laban will make sure that if there’s any truth to “Plan B”—an alleged ploy to impeach the president and catapult Leni Robredo—if indeed she ends up winning the vice presidential race—to the presidency—would not see the light of day. Doris Dumlao-Abadilla
Spot-on analysts
HAVE you ever wondered which economists/analysts often hit the bull’s eye when it comes to macroeconomic forecasting and which ones shoot from the hip?
Barcelona-based FocusEconomics—a provider of economic consensus forecasts for 127 countries in Asia, Africa, Europe and the Americas—tallied the most reliable forecasts on Philippine gross domestic product (GDP), inflation, exchange rate, Bangko Sentral policy rates, fiscal balance and current account balance.
For GDP, FocusEconomics said in its 2016 “Analyst Forecast Awards” that the best forecaster was Nicholas Gwee of Oxford Economics, followed by HSBC’s Qu Hongbin and Frederic Neumann and the research team of Standard Chartered.
For Philippine inflation, the best forecaster was JP Morgan’s Benjamin Shatil, followed by Citi Philippines’ Jun Trinidad and ING Philippines’ Joey Cuyegkeng. The best forecaster of peso-dollar exchange rate was UBS’ research team, followed by Daiwa’s Christie Chien and Goldman Sachs’ research team.
In predicting the Bangko Sentral’s monetary setting, the most reliable forecaster according to FocusEconomics was Daiwa’s Chien, BMI’s research team and Maybank Investment Bank’s Suhami Ilias. On the Philippine government’s fiscal balance, the best forecaster was Oxfold Economics’ Gwee, Credit Agricole’s Sylvain Laclias and Citi’s Trinidad.
In forecasting the country’s current account, the top forecaster was Banco de Oro’s Jonathan Ravelas, followed by BofA Merrill Lynch’s Jojo Gonzales and Claudio Piron and DBS Bank’s David Carbon. Overall, FocusEconomics said the best forecaster of Philippine macroeconomic data were HSBC’s Qu Hongbin and Neumann, Goldman Sachs’ research team and Oxford Economics’ Gwee. Doris Dumlao-Abadilla
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