Tuesday, 26 May 2009

Investors remain keen on Philippine corporate bonds

Erik de la Cruz
Business Mirror

WITH investors now willing to take on more risks amid signs the global economy is stabilizing and may recover later this year, the planned bond offerings of Philippine companies are to likely to continue drawing strong interest, analysts said.

An estimated P58 billion in corporate bonds were expected to be issued by several big companies, including Philippine Long Distance Telephone Co. (PLDT), between May and June, according to the May edition of the Market Call, a joint monthly report of analysts at First Metro Investment Corp. and University of Asia & the Pacific.

Other companies that had announced bond offers were conglomerate SM Investments Corp. (P10 billion), oil refiner Petron Corp. (P10 billion), and developers Ayala Land Inc. (P500 million) and Robinsons Land Corp. (P5 billion), power producer First Gen Corp. (P5.6 billion) Land Bank of the Philippines (P6.9 billion) and Union Bank of the Philippines (P5 billion).

PLDT had announced its plan to float P15 billion worth of peso bonds to partially finance the acquisition of shares in the Manila Electric Co.

“Demand for bonds will continue to increase. This is due not only to the increased risk appetite in the global market but also to the strong fundamentals of most companies that will float these bonds,” the report said.

But the analysts advised investors to “be careful in choosing bonds as some companies posted negative growth in the first quarter and poorer credit ratings.”

They said many companies had decided to take advantage of the improved risk appetite in both global and local markets and issue corporate bonds.

“This greater confidence was evidenced by the declining bond spreads of emerging-market sovereign issues and high-yield corporate bonds,” the report said.

Declining interest and inflation rates have also prompted investors to place their money in the bond markets, particularly in the short-term papers.

The Bangko Sentral ng Pilipinas (BSP) had slashed key interest rates by a total of 1.5 percentage points since December and signaled further rate cuts amid cooling inflation.

The analysts said the BSP might further cut its policy rates by 25 to 50 basis points as inflation was likely to decelerate further and drop to less than 1 percent by July and August. Inflation this month is expected to slow to 3.6 percent from 4.8 percent in April.

The BSP holds its policy-setting meeting on Thursday.

“The macroeconomic outlook remains slightly positive on the whole. A minor slowdown is expected in the second and third quarters, but a recovery may be in store for the last quarter of the year, as exports regain some strength,” the report said.

Exports are expected to recover starting the second quarter from a sharp slide in the first quarter as inventories are replenished in the country’s main overseas markets, it said.

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