Corporate bond issuances seen growing 20% this year

Corporate bond issuances in the country are seen growing by at least 20 percent this year on account of the positive sentiment of Filipino investors.

First Metro Investments Corp. (FMIC) said that despite the decline in the risk appetite of foreign investors so far in the year, bond issuances were poised to grow significantly.

“There is so much liquidity [in the local system] and sentiment in the country is positive,” FMIC president Roberto Juanchito Dispo said during the company’s economic briefing on Monday.

Last year, according to FMIC, corporate bond issuances amounted to P270 billion. So far this year, Dispo said, corporate bond issuances were already at about $300 billion.

Dispo said low inflation and benign interest rates in the Philippines were encouraging corporations to sell bonds to fund their expenditure programs. On the other hand, he added, liquidity was pushing investors to purchase securities.

FMIC expects inflation this year to average between 3.2 and 3.4 percent. This projection was well within the official target of 3 to 5 percent and slower than the 4.8 percent registered last year.

The financial services firm expects the central bank to keep its key policy rates, which influence commercial interest rates, at record lows of 4 and 6 percent for overnight borrowing and lending, respectively.

Dispo said more corporate entities were expected to sell bonds in the remainder of the year and the debt offerings were expected to be warmly welcomed by the capital market because of the positive sentiment of Filipino investors.

For instance, he said the government-owned Pag-IBIG was preparing to issue P20 billion worth of 15-year bonds in the domestic capital market in the second half of the year to help fund its expenditure requirements. The coming bond sale of the state-run firm was being arranged by FMIC, Dispo said.

Meantime, he said FMIC was preparing to sell P5 billion worth of its own five- or seven-year bonds next month to boost its resources.

Dispo said a few conglomerates were also expected to take advantage of the liquidity in the economy and sell debt securities in the second half. He said the strong appetite of local investors was compensating for the anemic interest of their foreign counterparts.