Six-month debt, equity sales down 11 percent

“Capital raising activities totaling only P271 billion in 2015 steadily ramped up the past few years.”

Generating funds for capital expansion and other purposes proved lower than anticipated in the first six months this year, with actual capital raising 11 percent lower than a year ago to only P327 billion, according to investment banking firm First Metro Investment Inc.

Capital generation activities from a year earlier, whether in the form of debt or equity shares, was higher at P366 billion.

This developed even as analysts at FMIC and elsewhere look forward to an expanding economy driven in the main by investments and by the strength of the local manufacturing sector.

The sale of fixed-income or debt securities in the first half amounted to only P177 billion, which was 35 percent lower than a year ago sale reaching P274 billion. Equity security issues, on the other hand, aggregated P150 billion or 63 percent higher than a year ago when this amounted to only P92 billion. The pick up in the sale of capital-boosting securities during the period explains in part the bullish outlook of securities brokers and stock market players at the Philippine Stock Exchange (PSE).

Still, the numbers reflect realities acknowledged even by those on the floor of the stock exchange given that forecast debt and equity activities for the period should have been substantially higher.

Data show anticipated debt and equity securities sales aggregating at least P467 billion in the first half, composed of P343 billion worth of debt notes and at least P123 billion in equity securities sales.

Instead, fixed-income debt note sales proved 48 percent lower as this totaled only P177 billion instead of the forecast P343 billion. Equity securities sales, however, proved higher than the forecast P123 billion as the actual figure stood 22 percent higher to P150 billion.

These local events developed against a backdrop of overseas developments in which the US Fed, the most influential central bank in the world, twice hiked its borrowing rate in March and June this year as did the Bangko Sentral ng Pilipinas which similarly raised its borrowing rate in May and June.

During this period, local inflation progressively ramped up from only 3.4 percent in January to 5.2 percent in July or well above the 4-percent ceiling set under the inflation-targeting regime instituted by the BSP many years earlier. It has been acknowledged that while the momentary authorities and the various analysts and experts continue to believe that inflation should soon fall to within-target levels, the inflation uptrend has muted some of the enthusiasm nornally elicited from the investing community.

It was also during this period when the exchange rate, averaging only P49.785 per dollar in January, steadily weakened to P53.037 in June, making corporate borrowing in foreign currency that much more risky than most investors prefer.

These developments also helped explain why some P64 billion worth of foreign capital invested in the Philippines during the period were sold for dollars and repatriated to their overseas principlas.

Analysts noted that capital raising activities totaling only P271 billion in 2015 steadily ramped up the past few years, totaling P383 billion in 2016, P724 billion in 2017 and projected to be at least 7 percent higher this year to P773 billion.