The Philippines is one of the current “darlings” of global investors
seeking better returns in emerging market economies and offers even bigger
potential returns in the future, according to a ranking official of foreign
investment firm Religare Capital Markets Ltd.
The company, which specializes in
equities investments in India and the Asean region, has decided to set up
operations in the country within the year to better take advantage of the
nascent Philippine economic boom.
“The Philippines is a market where
people want to put money into,” Religare’s global head of equity capital
markets John Sturmey said in an interview with the Inquirer. “The story here is
certainly better than how it was a few years ago. Everyone is saying good
things about the Philippines.”
Religare, which has the bulk of
its operations in India, Singapore and Hong Kong, is hoping to tap into the
growing demand from the local corporate market for investment banking and
equity deals.
The appetite of local
corporations for more capital on both the equity and debt sides jibes with the
massive amount of liquidity found offshore as central banks in the United
States and Europe try to revive their economies with cheap funds, leaving
investors awash with cash and few options for better returns in their home
markets.
“Investors are looking for places
where they can make money,” Sturmey said, pointing out that Philippine
companies used to have initial public offerings worth only $60 million. “Now we
see $300-400 million deals,” he said.
Religare’s equities head also
said that ongoing challenges being faced by China and Hong Kong—the twin
darlings of foreign investors over the past decade—also bode well for
alternative investment sites like the Philippines.
“Hong Kong and China are offering
fewer opportunities,” he said. “They’re ‘over-banked’ since there are a lot
more financial institutions chasing after fewer and fewer deals.” This has made
it less attractive for firms like Religare, which would have to contend with
thinning profit margins.
At the same time, the China and
Hong Kong markets have ongoing difficulties with corporate governance issues,
which are encouraging investors to look to other emerging market nations.
Previous to its announcement that
it would set up shop locally, Religare has already participated in the initial
public offering of Puregold Price Club Inc. late last year as a junior partner
of lead underwriter UBS (most of Religare’s senior officials are former UBS
bankers). More recently, Religare also initiated research coverage on local IT
gaming firm Philweb Corp.
Sturmey said that Religare was
particularly interested in the spate of “re-IPOs” being undertaken by local
corporations as part of the Philippine Stock Exchange’s thrust to increase the
free float of listed companies.
“These re-IPOs present good
opportunities to people like ourselves,” he said. “The Philippines has great
companies here but they’re trading $10,000 a day [in total value turnover].”
The Religare official expressed
confidence in the local market, saying the country was “in the best place it’s
been for decades, with a very strong macroeconomy and a solid political
situation.”
“It’s always been overlooked for
many years, even by the big banks,” Sturmey said. “The bigger question is,
whether it’s sustainable.”
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