THE PHILIPPINE corporate bond market is still suffering from low liquidity levels, resulting in a low amount of issuances compared with government bonds and leaving it behind Southeast Asian counterparts, investors said.
“For the bond market, I think the Philippines needs to be more competitive compared to those in the region. In terms of size, we are lagging [behind] our ASEAN peers,” said Maria Cristina B. Gabaldon, deputy head of Metrobank’s investment management division.
“I guess it has to do with the number of issuances. We need more supply of bonds. We need to deepen the capital market,” she added in a panel discussion at the Advancing the Philippines Bond Market Conference on Wednesday.
Compared with regional peers, the Philippine government remains dominating the bond market, said BPI Wealth Head of Investment Solutions Gladys Buenaventura.
“In other countries, it’s relatively equal. Here, we still see limited corporate issuers,” she said.
According to the Asian Development Bank’s Bond Monitor, corporate bonds comprised only 13.6% of the outstanding local currency bonds in the second quarter.
Ms. Gabaldon said demand exists for corporate bonds, but the country lacks issuers.
“We need more supply of bonds. We need to deepen the capital market. I think demand is there. It depends on the tenor. Some retail investors are asking for the short-term tenors while some companies want longer tenors. So I think corporates and BTr (Bureau of the Treasury) should take advantage of this demand,” she said.
Ms. Buenaventura likewise said increasing market makers could solve the liquidity issue on the corporate side.
She added that bond literacy in schools could help drive the demand for bonds, and thus increase the liquidity in the market as well as accessibility of the market to the public.
“As we know, most Filipinos are very familiar with stocks. It’s so easy for them. But once we start talking about bonds, it’ll take time for us to actually explain to them how the whole instrument works,” Ms. Buenaventura said.
She noted that a more “curricular” rating system for the issuances could help investors assess what they are investing in and compensate them for the risk they are taking.
BDO Unibank Vice-President and Fixed Income Manager Jason Samson L. Clemente, Jr. added that transparency is also lacking, and improving it could help in expanding the market. — Aaron Michael C. Sy