The Philippine exchange signed a “basic memorandum of agreement” to merge with the debt exchange, President Hans Sicat said today in Manila. The bourse, Singapore Exchange and the Bankers Association of the Philippines hold 65 percent of the Philippine Dealing System Holdings Corp., owner of the bond exchange and a securities depository.
“We agreed to work together and figure out how we consolidate both exchanges,” Sicat said in an interview. “We will still work out the details.” The transaction will probably be completed this year, and the full operational merger will take another year, Sicat said.
Finance Secretary Cesar Purisima has supported a combination to deepen the nation’s financial market. A union would have bonds traded on the stock exchange, bourse Chairman Jose Pardo said in July 2011 when he first mentioned a possible merger. The combination will help Sicat fulfill a goal of expanding the financial products traded on the bourse in the next 12 months.
“A merger is definitely positive for capital market development and will generate gains for both equities and bonds trading,” said Paul Joseph Garcia, who helps manage the equivalent of $18 billion at BPI Asset Management Inc. in Manila. “This will make bond prices more accessible and transparent because the stock exchange’s platform has a broader reach and access to more individual investors.”
“This combination will make our stock exchange similar with other mature exchanges, which have both fixed and equity products under one roof,” Sicat said. “The integration of the depositary will also strengthen the exchange’s structure and allow it to introduce other products and services.”
Bond trading would help boost volumes on the Philippine Stock Exchange, which runs the 12th-biggest equity market in the Asia Pacific region. Philippine stock trading averaged $266 million a day this year, about 1 percent of the average in Japan, Asia’s biggest equities market.
“Combining equities and bonds under one exchange is a very good move because the Philippines is really a small market,” said Eusebio Tanco, director at the stock exchange and president of Asian Terminals Inc., a listed company. “The intention here is to really improve trading and create a stronger exchange.”
Merging the two exchanges could help lower costs on fixed-income trading, Bankers Association President Lorenzo Tan said in a statement. The stock exchange will create a Capital Market Surveillance Group to eventually monitor products other than equities, according to the statement.
The Philippine Stock Exchange posted a 28 percent increase in first-quarter profit to 184.8 million pesos ($4.5 million), according to a regulatory filing. Revenue from service and listing-related fees reached 179.75 million pesos. Trading-related fees amounted to 64.09 million pesos, while it collected 13.78 million pesos in regulatory fees.
Bonds listed in the Philippine Dealing & Exchange Corp. rose 41 percent to 277.5 billion pesos in 2012, Philippine Dealing System President Vicente Castillo said on Feb. 28. Twenty-one corporate debt issues valued at more than 110 billion pesos were listed on the bond exchange last year, 288 percent more than in 2011, he said.
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