PH’s planned ‘panda’ bonds get highest rating from Chinese credit agency

The Philippines’ upcoming venture in China’s debt market got a boost from a top Chinese credit rating agency, which gave the planned “panda” bonds issuance its highest rating on the back of the country’s solid macroeconomic fundamentals.

In a statement issued on Monday, the Department of Finance (DOF) said this March’s issuance of three-year panda bonds worth 1.46 billion renminbi (about P12 billion) was rated ‘AAA’ with a stable outlook by China Lianhe Credit Rating Co. Ltd.

The DOF said the Chinese debt watcher noted the Philippines’ “strong and consistent economic growth, low level of external debt and ample foreign and current account reserves as plus factors for its float this year.”

Also, the credit rating agency “factored in the strong economic ties between Manila and Beijing, and the Duterte administration’s stable source of payment from growing government revenues,” the DOF added.

“Lianhe Ratings expects the Philippines to have a GDP [gross domestic product] growth of around 6.8 percent in 2018. At the same time, the unemployment rate of the Philippines is expected to remain stable and CPI [consumer price index) growth may stay within the target band [of 2-4 percent] set by the BSP [Bangko Sentral ng Pilipinas],” it said in a report.

According to the DOF, the debt watcher said “the successful implementation of President Duterte’s 10-point socioeconomic agenda, citing among them the first package of the comprehensive tax reforms, Tax Reform for Acceleration and Inclusion (TRAIN), will help the Philippines achieve more rapid and equitable economic growth in the following years.”

In its report, Lianhe said “the country’s strengths lie in its strong and consistent economic growth, with employment continuously improving; government debt ratios that are continuously improving and well covered by fiscal revenue; large remittance inflows  that contribute to the country’s ability to earn foreign exchange; low level of external debt and the very strong capacity to repay these obligations; and stable source of repayment from growing government revenues.”

On the sidelines of a treasury bills auction also on Monday, National Treasurer Rosalia V. de Leon told reporters that the government was “watching the market closely, and if there will be an opportunity for us to be able to go ahead and trigger the [panda bonds] issue then we will do so.”

De Leon said the panda bonds issuance may happen within this March.

“Things are getting favorable for us so we are just discussing with the underwriters what will be the price guidance and if it’s competitive with our own pricing and the dollar space,” De Leon asserted. “And hopefully we get [an] even better [price] because it’s very minimal—just equivalent to $200 million. It’s really just making our mark in the onshore renminbi market.”                                    /kga