The Securities and Exchange Commission (SEC) of the Philippines says that once the market gets over the current liquidity crunch and high interest rate environment, it expects “a deluge” of companies to go public.
SEC commissioner Kelvin Lester Lee, speaking earlier this week at The Asset’s 18th Philippine Summit in Manila, during its Deepening the Capital Market panel discussion, revealed an ambitious plan, stating the regulator hopes to boost the number of publicly listed companies in the Philippines “in the next one to two years” from the current number of 284 or 285, to over 300 by adding at least 15 new ones under its yet-to-be launched Project 300 scheme.
And Lee hopes that once the ball gets rolling, more companies will follow and offer to list publicly shortly afterwards.
“We just have to weather through this,” he shares. “And by Q2 or Q3 next year – presuming the [US] Fed adjusts its rates [lower] – we’re going to have a deluge of IPOs [initial public offerings] because by then we’ll have a very good interest rate environment, a very conducive regulatory environment, and a lot of our efforts coming to fruition by that point.”
However, while neighbouring Indonesia has experienced a recent boom in IPOs, partly fuelled by the electric vehicle market, the Philippine Stock Exchange has recently experienced the opposite, including several voluntary delistings, foremost among them, the decision of the Manny V. Pangilinan-led Metro Pacific Investments Corporation to go private, citing its belief that the stock is undervalued.
When asked how the recent delistings factor into the SEC’s Project 300 plans, however, Lee says that while the SEC is aware of those who have chosen to delist he isn’t worried. Without giving specifics, he reveals that some of these firms have also indicated that they intend to list some of their smaller entities and that, in his conversations with underwriters, companies and conglomerates, many have indicated that they already have IPOs in the pipeline.
“A lot of them are actually already structuring the deal and preparing it,” he adds. “They're just waiting for a better environment. I emphasize the point: A lot of the problems that we’re facing now can be kind of attributed to the interest rate environment that we currently have.”
Capital market initiatives
Lee also highlights other SEC initiatives that he hopes will further enhance the capital market in the Philippines, including a recently-launched programme that promises a shortened 45-day processing period for any IPOs or issuances.
“Our experience has been that when some of these things are submitted to us, more often than not, there are some missing requirements and, of course, there's some back and forth,” he explains. “The focus now is to just have a strict 45-day processing period.”
The programme has seen some early successes, according to Lee, with some bond issuances having been processed within 35 or 36 days.
Lee also touts the SEC Powers programme, which entered the public consultation phase last week.
Under the programme, the SEC is collaborating with the Energy Regulatory Commission to create a framework to fulfil the 15% public offering requirement of public power generators under the Electric Power Industry Reform Act.
“In theory, it will make it much easier for power generation companies to be able to list or make their common shares available to the public in a more expedited format,” Lee says, adding that the SEC and the Energy Regulatory Commission hope to implement the programme by November 28.
While the SEC is aware of the current issues that plague the market, he hopes that the initiatives of the regulator will help the market bounce back, sooner rather than later
“The point I want to make is, yes, we are aware of the issues in the market,” Lee states. “And yes, we have been working very hard at trying to alleviate it by trying to create a more conducive environment for IPOs and issuances.”