Corporate bonds

Outstanding corporate bonds rose to P 1.52T at the end of June 2021

Undersecretary of Finance, Gil Beltran. (Photo taken from his Facebook page)

The ability of local businesses to raise more of their financing needs in the local debt market in recent years indicated continued investor confidence in the economy, the Department of Finance (DOF) said.

In an economic bulletin on Saturday, DOF Undersecretary and Chief Economist Gil Beltran noted that at the end of the first half of 2021, the Philippines’ local currency corporate bonds outstanding stood at $1. .52 trillion pesos, or 8.2% of Gross Domestic Product (GDP).

Citing data from the Manila-based Asian Development Bank (ADB) and the Philippine Statistics Authority, Beltran said the corporate-operated peso bond market expanded to 1.61 trillion pula or 9 % of GDP last year, down from just P384.2 billion or 4.1%. of GDP in 2010 and barely 7.5 billion pula (0.2% of GDP) in 2000.

Solid pillar

Before the COVID-19 pandemic, this market grew to 1.31 trillion pula in 2018 and 1.5 trillion pula in 2019.

“From almost tiny twenty years ago, the Philippine local currency bond market has grown considerably. In many ways, the ability to issue local currency bonds reflects investors’ confidence in the economy. The fiscal sector, once the Achilles’ heel of the economy, has become a strong pillar of sustainable development and a catalyst for the development of capital markets,” Beltran said.

Beltran added that the Tax Reform for Acceleration and Inclusion (TRAIN) Act has “helped democratize real estate investing, even indirectly,” noting that three real estate investment trusts (REITs) have already debuted on the local stock exchange, in addition to another, which was on its way to an IPO.

Proposed Changes

For Beltran, “passing the Capital Markets Development Bill 2021 is expected to increase demand for financial securities.”

“The larger issuance of these securities, however, will depend on the sustainability of economic growth and the efficiency of financial markets. Sustainable economic growth can be enhanced by the participation of foreign capital, which could be catalyzed by the proposed amendments to the Foreign Investment Law, the Civil Service Law and the Retail Trade Liberalization Law,” said Beltran said.

“The fourth package of the comprehensive tax reform program, the Passive Income and Financial Intermediary Tax Reform Act, aims to make Philippine financial markets more efficient and competitive, among other things, by streamlining or even eliminating stamp taxes. ‘harmful’ documentary on financial products that are the sources of frictional costs in financial markets,” he added.

—Ben O. from Vera INQ

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