MANILA, Philippines — American global banking giant Citibank is upbeat on prospects for Philippine corporations to raise fresh funds from either debt or equity, but is advising potential issuers to act promptly as the “window” may narrow, given lingering uncertainties in the overseas markets.
Apart from fresh fund-raising, Citi also sees ample merger and acquisition (M&A) opportunities for Philippine companies not just domestically but through cross-border and overseas expansion such as the route being taken by blue chips Jollibee Foods Corp., International Container Terminal Services Inc., SM Prime Holdings Inc., Integrated Microelectronic Inc. and Universal Robina Corp.
“I think the markets are open and we are constantly looking, scanning the markets for right opportunities for corporates,” Citi Philippines country officer Sanjiv Vohra said in an interview.
But instead of seeing a trend line, he said the markets would likely be “choppy” and “volatile,” which meant corporations keen on selling debt or equity should always be prepared to look for the right window of opportunity.
“I think the windows will get narrower instead of wider,” he said.
Apart from mixed economic data in the US and the social unrest in the Middle East, global markets at present are still bothered by Europe’s fiscal woes.
Kristine Braden, Citi Philippines head of global banking, said Philippine corporate issuers has been generating a lot of demand from the overseas markets. She noted that a number of unrated local corporate issuers have successfully forayed into the overseas capital markets because they were deemed of high credit quality and that the Philippines has been generally deemed a “safe harbor” given its sound macroeconomic backdrop.
“The main challenge is not really credit worthiness but global credit conditions. There are a lot of risks that have caused volatility,” Braden said, noting the aversion caused by the social turmoil in the Middle East and the fiscal woes in Europe.
At the same time, Braden said the local financial market remained liquid for those wishing to issue peso-denominated instruments.
Cross-border M&A involving Philippine corporations who wished to go overseas has been likewise a big focus for Citi, Braden said.
“Historically, the largest companies were from North America, Europe and Japan. Today, some of the largest companies are from Asia or Latin America and even Africa. And from a banking services perspective, Citi is everywhere they want to go to,” Braden said.
“It used to be DM (developed market) to EM (emerging market)..Now it’s EM to EM. It’s not the traditional flows because you have such globalized trade and acquisition targets may be synergistic in different emerging markets,” she said.
In the case of ICTSI, for instance, she noted that this Philippine port operator had focused on emerging markets abroad because the margins were better and it knew how to handle local regulatory and political risks.
She said more and more cross-border transactions would likely happen, especially for big local corporations seeking growth opportunities.