Local companies continue to prefer raising capital from the bond market while the shying away from the equities market which continues to be volatile.

Data provided by Philippine Rating Services Corporation (PhilRatings) show, bond offerings surged from just P8 billion in 2008 to P100.86 billion this year.

In contrast, there was only one small initial public offering at the Philippine Stock Exchange, that of Ripple E-Business International which raised P20.1 million, and some stock rights offerings led by that of SM Development Corporation which raised P4.8 billion.

PhilRatings president Renato Peronilla credited the surge in bond offerings to the “relatively positive performance of Philippine economy in 2009, compared to other economies and markets globally.”

He also noted the relatively lower interest rates for bonds this year compared to previous years, liquidity in the financial system, the volatility in the global financial markets which led companies to domestic sourcing of funds, and that access to funds overseas has not been as good as before.

Peronilla said other factors favoring bond issuances is that “big corporates and conglomerates are also hitting their SBLs with the banks” while more bonds are being listed at the fixed income exchange since the fixed income exchange provides a platform for secondary trading of securities and makes bond prices more transparent.

He pointed out that the stock market is also not that attractive for initial public offerings.

Accord Securities analyst Justino Calaycay Jr. explained that the strength of the bonds market versus the stock market reflects continued risk-aversion of investors as concern on the timing and strength over a recovery lingers.

He added that bonds are attractive compared to the fluctuations of stocks.
“At present, safety over growth is the major consideration, especially among institutionals who have fiduciary obligations,” said Calaycay.