Gov’t urges merger of PSE, bond exchange

The government is encouraging the merger of the Philippine Stock Exchange (PSE) and the Philippine Dealing and Exchange Corp. (PDEX) as such a move will create a stronger and more attractive securities market in the country.

Finance Secretary Cesar Purisima said a merger of the two markets within the term of President Aquino would complement ongoing efforts to sustain the favorable performance of the Philippine economy.

“We are encouraging the PSE and PDEx, if it is in their interest, to consider merging. The Philippine market is growing rapidly, but it is still not big enough to have two markets,” Purisima said in a speech during the launch of the “Asian Bond Monitor,” a quarterly publication of the Asian Development Bank.

“We would like to see that during the term of President Aquino,” he added. However, Purisima noted that the government could only persuade the PSE and PDEx since these were private-sector run entities.

He said that with only one exchange for equities and fixed-income securities, trade volumes could be bigger and the cost of further developing their infrastructure would be much less.

Governance of the securities market should also improve with a merger, he said.

Purisima said the government wanted to see more corporations in the Philippines tapping the bond market for their funding needs rather than heavily relying on bank loans.

Currently, 87 percent of the outstanding bonds issued in the Philippines were accounted for by government securities and only 13 percent were corporate bonds. Although the volume of corporate bond issuance grew last year, the finance chief said there was room to sustain a faster pace of growth.

Data from the Asian Development Bank showed that there were $13 billion in outstanding corporate bonds in the Philippines at the end of 2012, up 30 percent from $10 billion in the previous year.

“We like to see more of the Top 5,000 corporations in the Philippines to access the bond market,” Purisima said.

Purisima, who also sits in the policy-making Monetary Board of the Bangko Sentral ng Pilipinas, said an increased dependence on the bond market and less on the banking sector has its benefits.

“We don’t want our banks to be saddled with NPL [non-performing loans] and create risk for the banking system. That is why it is important for the bond market to grow,” Purisima said.

Meantime, the positive outlook on the Philippine economy has also pushed the stock market to grow, with the Philippine Stock Exchange index (PSEi) registering several record highs early in the year.

Purisima said the country’s capital markets would further develop if the two exchanges were to merge. Michelle V. Remo