The Philippine Stock Exchange says its target for record share sales this year is still achievable as at least three “big names” plan initial public offerings amid rising volatility and after a market rout last month.
The bourse is sticking to its previous forecast that share sales this year may exceed last year’s record of 219.07 billion pesos ($5.05 billion), Philippine Stock Exchange President Hans Sicat said in an interview today in Manila. Philippine companies have raised 31.12 billion pesos this year to July 5 from IPOs and secondary share sales, 66 percent less than the same period last year, data from the stock exchange show.
The benchmark Philippine Stock Exchange Index (PCOMP) fell into a bear market last month, sending valuations to a seven-month low and volatility to the highest in more than four years, as international investors sold emerging-market assets amid speculation the U.S. will cut monetary stimulus. Overseas funds sold a net $241 million of Philippine stocks in June, the biggest monthly outflow since December 2008.
“There are another three to four big names in the IPO pipeline,” other than Travellers International Hotel Group and Robinsons Retail Holdings Inc., Sicat, 52, said before the start of a conference in Manila. “We need three to four of the bigger deals to catch up with the target,” he said, declining to name the companies or the sizes of their planned share sales.
Casino-operator Travellers reportedly delayed a planned IPO while Robinsons Retail indicated it will wait for better market conditions.
The Philippine Stock Exchange Index slumped 7.9 percent last month after Federal Reserve Chairman Ben S. Bernanke said May 22 the central bank could consider curbing its bond-purchase program should the U.S. economy show more signs of improvement.
The gauge’s 30-day historical volatility rose to 45 on July 1, the highest level since December 2008, when the collapse of Lehman Brothers Holdings Inc. fueled a global equities rout.
“We aren’t changing anything even with the volatility we have seen recently,” Sicat said. “Valuations remain attractive and the level of interest from issuers remains high. If the deals that we are supposed to see happen then we will make it.”
Sicat said while the market will remain volatile over the short term, the degree will probably be less than that seen in the past two weeks, as investors have already gone through the initial shock from the prospect of a tapering U.S. stimulus.
“The market will continue to be volatile for the simple reason that U.S. market data and their interpretations tend to be confusing,” Sicat said. “The Euro zone also has its own issues. And closer to home there are questions over Japan and China. Short term the markets will be more volatile compared to last year.”
The Philippine index sank 22 percent from its May 15 record through June 25, entering a bear market. It has rallied 12 percent since then after valuations fell to a seven-month low of 16 times projected 12-month earnings, data compiled by Bloomberg show. The benchmark now trades at a multiple of 17.7 times, down from a record 21 on May 15, the data show.
While it might be a “bit optimistic” to expect valuations to return to a peak later this year this could still happen, as the IPOs of “large” companies may sustain investors’ interest in the nation’s equities, Sicat said.
Foreign investors have bought a net $34.4 million of Philippine equities this month, according to fund-flow data compiled by Bloomberg.
Last month’s rout in equities caused Travellers International, partly owned by Genting Hong Kong Ltd., to delay an IPO worth as much as $842 million, IFR Asia reported on June 25. Frontier Oil Corp., an oil and gas explorer, also moved a share sale planned in June to the end of the year because of the slump in equities, the Philippine Star reported July 5, citing Chief Executive Kristoffer Fellowes.
Robinsons Retail, an operator of department and grocery stores, is waiting for the right timing to proceed with a 40 billion peso IPO, Lance Gokongwei, whose family owns the venture, said June 27.
Harbor Star Shipping Services Inc. and AG Finance Inc., a provider of microfinance and consumer loans, are scheduled to hold initial share sales this month. Harbor Star hopes to raise as much as 593.8 million pesos, while AG Finance is targeting 149.8 million pesos, stock-exchange filings show.
To contact the reporter on this story: Ian Sayson in Manila at firstname.lastname@example.org