The number of listings at the Philippine Stock Exchange is forecast to rise in 2025 from just a handful this year as a consequence of the decline in interest rates that makes equities attractive versus fixed income securities.
BDO Capital and Investment Corp. president Eduardo Francisco said the investment company anticipates its involvement in as many as 10 initial public offerings next year.
“A lot of these have been in the pipeline as earlier announced by PSE president and CEO Ramon S. Monzon. The plans have been revived recently,” Francisco said at the sidelines of the EJAP-AboitizPower Renewable Energy Forum.
He explained the high interest rate environment of the recent past has made it less than ideal to invest in stocks since yields were lower than bonds despite the inherent risk of price volatility.
“But since yields of fixed income securities are expected to go down with the expected cuts in policy rates, companies planning to go public now have a chance to compete with bonds,” Francisco said.
Over the near horizon, the Bangko Sentral ng Pilipinas is seen to cut the policy rates by another 50 to 75 basis points this year and by 100 basis points in 2025.
“If the rate goes down to 5 percent, that’s minus 1.5 percent, IPOs have a fighting chance. Equities will become very interesting. It will be more convincing to do equities if the total decline in rates is 1.5 percent to 1.75 percent,” Francisco said.
Since rate cuts will be gradual, Francisco said there may be just two to three firms braving the IPO market in the first half of 2025 with the rest coming in later next year when the policy rate has been cut further.
Francisco said the companies hoping to have their IPOs next year include those engaged in real estate, consumer, retail, food manufacturing and food service businesses, he said.
He noted the food business is doing very well.
He likewise said most of the IPOs will be less capitalized firms offering their shares only in the domestic capital market. Given this, there could be no “jumbo” offerings. The large IPOs, or those worth more than P5 billion, will require an international offering and the overseas market is more competitive and requires a premium or bigger yields.
The PSE projects six IPOs launched later this year and raise P175 billion more or less from the investing public. Thus far, however, only three companies have gone public, including NexGen Energy Corp., OceanaGold Philippines Inc. and Citicore Renewable Energy Corp.
Last year, the PSE launched three IPOs, down from nine in 2022 and the most number of IPOs in a single year since 2007.
The IPOs expected to launch next year include tycoon Enrique K. Razon Jr.’s Prime Infrastructure, SM Prime Holdings Inc.’s real estate investment trust and the Ayala-backed e-wallet behemoth GCash.
These have all been deferred and were unlikely to take place next year.
