Easing of stock market listing rules approved

The Securities and Exchange Commission has approved a new listing framework submitted by the Philippine Stock Exchange (PSE) to ease some requirements as a way to entice more firms to go public.

In a forum with the Financial Executives Institute of the Philippines on Wednesday, SEC Chair Emilio Aquino said the SEC had approved the PSE’s amended listing rules as one of the measures to benchmark corporate regulations with Asean-6, referring to the six biggest economies in the Association of Southeast Asian Nations: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Aquino said the new framework would address constraints on the listing of companies, particularly small and medium enterprises (SMEs).

“We did check the practices of Bursa Malaysia, SGX (Singapore Exchange) and the stock exchange of Thailand just to make sure we are at par with them,” he said. “We might not be able to be as robust as Singapore but I think we have a good chance with Malaysia and Thailand.”

In the case of Malaysia, Aquino said its stock market had so many listed companies because a lot of state-owned entities were also registered.

“Philippine companies are at par with our Asean neighbors in terms of corporate governance,” he said. Citing a regional ranking unveiled in Kuala Lumpur, Aquino said the Philippines had nine out of 50 top Asian companies in terms of corporate governance.

To date, the local stock market is at the bottom of the pit when it comes to listing activities. There are only 271 listed companies in the PSE, compared to 932 in Bursa Malaysia, 691 in Indonesia Stock Exchange, 716 in Singapore Exchange and 724 in Stock Exchange of Thailand. Vietnam has 357 companies in the Hanoi Stock Exchange and another 380 in the Ho Chi Minh Stock Exchange.

Aquino wants to bring in more companies to the stock market. “That’s why we approved the amended listing rules to bring down the profitability and track record requirement,” he said.

The PSE had proposed to relax listing rules and offer time-bound relief for IPO applications this year or 2022 in consideration of the COVID-19 pandemic.

For the SME board, the PSE had proposed to remove the requirement of positive earnings before interest, taxes, depreciation and amortization (Ebitda) for at least two of the three fiscal years before listing application.

For the main board, the PSE wanted to scrap the minimum market capitalization requirement of P500 million. However, listing applicants must have booked a cumulative net income of P75 million for the past three fiscal years, and a net income of at least P50 million for the fiscal year immediately preceding the filing of the application.

The PSE intends to use net income, instead of Ebitda, as profitability metric, in line with Southeast Asian norms.

As of press time, however, the PSE has yet to see the final framework as approved by the SEC. —DORIS DUMLAO-ABADILLA