Corporate bonds sale down by 13% in 2011

Corporate bond issuances dropped in 2011 from the year before as companies were able to obtain more funds from other sources, such as equity sale and bank loans.

Monetary officials said the diversity of financing sources indicated the domestic capital market’s liquidity, which meant that resources were available to help boost economic activity in the country.

Data from the Bangko Sentral ng Pilipinas showed that corporate bonds sold last year amounted to P181 billion, falling by 13 percent from P208 billion in the previous year.

The decline in the sale of bonds came with the significant increase in funds raised from the equities market, which enjoyed robust growth given expectations of improving economic prospects for the country.

The amount of capital raised through the Philippine Stock Exchange reached P109 billion last year, rising by 28 percent from P85 billion the previous year.

The economy slowed down last year, growing by only 3.7 percent from 7.6 percent in 2010. The government’s claim of higher public spending this year and improving macroeconomic conditions helped improve risk appetite of investors.

The rise in equity sale last year was also linked to the prolonged debt crisis in the eurozone and the sluggish growth of the US economy that prompted foreign fund owners to seek investment instruments in emerging economies like the Philippines.

In the meantime, banks posted robust growth last year in terms of resources and profits. Their profitability allowed the sector to lend more.

Monetary officials said a positive outlook on the country’s growth prospects and income of households and enterprises made banks comfortable to increase lending.

Data from the BSP showed that outstanding loans of the banking sector grew by 19.3 percent last year to reach P2.7 trillion.

The rise in bank lending came amid calls by regulators for banks to extend more credit to help the economy grow despite the unfavorable developments in the global economy.

Despite the robust growth in lending last year, banks are urged to further increase their loans to households and corporate borrowers this year.

Monetary officials said banks still had significant room to further increase lending, given their liquidity.

They are, however, told to keep prudent lending standards to avoid increasing their exposure to defaults even if they extend more loans.