Corporate bond issuances surged in 1st 5 months

The amount of corporate bonds sold in the domestic capital market surged in the first five months of the year, indicating what monetary officials said could be robust growth of the economy over the short term.

From January to May, bonds issued by corporate entities amounted to P165 billion—more than double the P74 billion registered in the same period last year, data from the Bangko Sentral ng Pilipinas showed.

Officials said the growth in corporate bond issuances suggested that firms were in need of cash during the period to fund investment initiatives or expansion plans. They noted how most companies had stepped up business activities at a time when the Philippine economy appeared to be doing well.

In the first quarter, the economy grew by 6.4 percent—faster than the 4.9 percent recorded in the same period last year. Growth in the first three months was the second fastest in Asia for the period next to China’s 8.1 percent.

Because of the strong performance seen in the first quarter, the country should be on track to attain the full-year economic growth target of 5 to 6 percent, economists said.

According to officials, the increase in corporate bond issuances has been encouraging because it indicates that there is sufficient liquidity within the economy to finance investments.

It is comforting to know, they said, that most enterprises are able to tap needed funds not only from banks in the form of loans, but also from the capital market through bond sales.

But the surge in bond issuances in the first five months coincided with a drop in the amount of funds raised from the Philippine Stock Exchange.

During the same period, stocks sold through the PSE amounted to P47.5 billion, down by 21 percent from about P60 billion in the same period last year.

The drop in equities sold through the local bourse was due to heightened risk aversion resulting from the prolonged debt crisis in the euro zone.

Equity sale is partly influenced by foreign investments. Analysts said the uncertain outlook on the global economy prompted some foreign fund owners to shy away from risky investments such as equities.