LOCAL investment firm Unicapital Group expects more initial public offerings (IPOs) to proceed due to a favorable outlook on interest rates.
“I think we’re going to be seeing rate reductions, (and) there will be more to come,” Unicapital Group President and Chief Executive Officer Jaime J. Martirez said during a briefing on Wednesday.
He said that this will lead to a gradual shift in the equity market.
“I see right now that there is a lot of upside, so there would be more interest right now (from companies) to pursue their IPO plans,” Mr. Martirez added.
The Bangko Sentral ng Pilipinas recently cut its target reverse repurchase rate by 25 basis points (bps) to 6.25%, marking its first reduction in nearly four years. The move is in response to an improving inflation and economic outlook. The central bank’s governor also indicated the possibility of another cut before the end of the year.
Unicapital Head of Research Wendy B. Estacio-Cruz expects that the PSE index could reach 7,000 by the end of this year, revising the company’s earlier estimate of 7,200.
“That’s a 9% gain from end-2023. That’s based on our bottom-up analysis, which is based on an 11% earnings per share growth rate and at 12.5% target price-to-earnings,” she said.
Ms. Cruz added that Unicapital anticipates a “more pronounced easing of key policy rates” as early as the next Monetary Board meeting in October, driven by the downward trend in inflation rates.
“The inflation rate is anticipated to drop further in the coming months due to the recent rice tariff reduction from 35% to 15%. We expect easing key policy rates in the second half of 2024, with up to a 50-basis-point rate cut, driven by a cooling inflation rate,” she said.
Meanwhile, Mr. Martirez hopes more companies will list on the Philippine Stock Exchange (PSE) to spur market activity.
He noted that the main challenge in improving value turnover compared to the Association of Southeast Asian Nations (ASEAN) neighbors is to increase the number of companies listing on the market.
“In terms of the number of listed companies, I believe we still are not in the same breath as our ASEAN neighbors. We’re getting there. It’s just a question of time,” he added.
As of this writing, the PSE has 286 listed companies. The market operator aims to achieve six IPOs this year.
So far, the local bourse has had three IPOs: OceanaGold (Philippines), Inc., Citicore Renewable Energy Corp., and NexGen Energy Corp.
Founded in 1976, Unicapital Group provides a range of services, including investment banking, financing and lending, treasury services, and securities brokerage. — Revin Mikhael D. Ochave
