PSE expects to raise P200-B capital in ’17

The Philippine Stock Exchange (PSE) is bracing for a volatile year this 2017 but still sees capital-raising activities hitting anew the P200-billion annual goal.

In a presentation to the Filipina CEO Circle (FCC) Thursday, PSE president Hans Sicat said despite a challenging global environment, the country’s fundamentals remained favorable, with the government’s infrastructure-building program offering a strong story that would likely lift growth this year.

Last year, about P177 billion in fresh capital was raised through the PSE via the offering of primary shares, whether through initial public offering, private placement, follow-on offering or stock rights offering.

Including the sale of secondary shares, funds raised through the PSE summed up to P227.25 billion, Sicat said.

“Our target for the last three years had been at P200 billion fund-raising and we maintain that target for this year,” Sicat said.

Asked how big of a factor could President Duterte be on the stock market, Sicat said it was hard to assign any specific percentage. “As far as we’re concerned, the positive news is economic momentum continues to be solid despite the political noise.”

If the administration would be able to deliver on the promised tax reform package and aggressive infrastructure spending, Sicat said the economy and the market would win big.

“You hope the noise, whether external or internal, does not become the main variable for investors, local and foreigner,” he said.

Citing the forecasts of multilateral institutions, he said the country’s gross domestic product (GDP) could grow by 6.2 percent (World Bank) to 6.7 percent (International Monetary Fund) this year.

Mr. Duterte’s tax reform package seeks to cut maximum personal income tax to 25 from 32 percent and the corporate income tax to 25 from 30  percent.  It also seeks to expand the value-added tax (VAT) base by reducing the coverage of its exemptions.  The program also bats for the adjustment of excise taxes imposed on petroleum products as well as the restructuring of the excise tax on automobiles except buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles.

Sicat welcomed the government’s plan to double infrastructure spending as a percentage of gross domestic product to at least 5 percent.

On corporate earnings, he noted Bloomberg’s consensus growth forecast on earnings per share had recently been raised to 14 percent or twice faster than the pace of domestic economic growth seen last year.

“Over the last three years, listed companies have actually grown earnings and revenues higher and faster than the growth of the GDP, which is why our P/E (price to earnings) ratio is higher than regional average,” Sicat said.

The five-year historical P/E ratio of the local stock market was at 18x, which means that investors were willing to pay 18 times the money they expect to make from this market.