Reforms needed to boost PH capital markets

The Philippines must embrace more reforms to enable any person on the street to protect and create wealth by investing in stocks and bonds.

This was the view shared by BDO Capital and Investment Corp. president Eduardo Francisco during the recent Euromoney Philippine Investment Forum.

Francisco stressed the need to intensify financial literacy efforts in the country to achieve inclusivity and make the local capital markets at par with those of developed countries.

One of the solutions suggested by Francisco was not only to digitize but also to eliminate too many touchpoints for initial public offerings (IPO) or bond subscriptions. Too date, he said there were too many roadblocks for ordinary people to invest in the local capital markets.

Subscribing to equities and bonds in the country is “too cumbersome” due to the numerous documents, forms and identification required, he noted.

“Our Monetary Board, Securities and Exchange Commission (SEC), Philippine Stock Exchange are open to new ways to raise the number of investors and make it (investment options) more available to the masses. We have seen them liberalize rules but we need to propose new products or solutions,” Francisco said.

The Philippines should also look into new platforms and models from abroad, particularly innovative solutions that would minimize documentation requirements.

“Foreign players with platforms abroad are welcome here. Fintech (financial technology) solutions are also welcome, we can work with the regulators to get approvals,” he added.

The Philippine capital markets may have had significant developments over the years but they remain relatively small compared to those of other emerging economies in Asia.

In the last five years, Philippine corporations have raised over P1.7 trillion from five to eight IPOs and 10 to 15 corporate bond deals a year.

Retail investors have also stepped up especially for local equity and fixed income deals and now account for 50 percent to 70 percent of the volume, compared to previous years where institutions took up around 60 percent to 70 percent.

Despite these, IPOs and bond issues in the country still pale in comparison to those in other emerging economies in the region. While participation by retail investors has increased, most of them still come from the more affluent segments, leaving behind a huge untapped market such as the overseas Filipino workers and the unbanked sector.

As such, Francisco said the challenge was to make the local capital markets more inclusive by removing barriers to entry and using more financial innovations.—DORIS DUMLAO-ABADILLA