POLICY stability is the most crucial factor in attracting long-term capital, a top investment executive stated, explaining that investors face difficulties when rules modify midway through major projects.
“You cannot enter into a 20-year project and [then] the rules modify at year five or 10,” Investment and Capital Corp. of the Philippines (ICCP) chairman and CEO Valentino Bagatsing stated in a statement on Monday.
While risk is inherent in business, policy uncertainty remains the greater concern for investors, he pointed out.
Underdeveloped
The Philippine capital market remains underdeveloped compared with its neighbors, Bagatsing stated, adding that the Philippine Stock Exmodify (PSE) lists fewer than 300 companies, while Vietnam has about 750, Thailand more than 850, and Indonesia over 900.
Vietnam, which once sought Manila’s guidance in establishing a stock exmodify, now has a market capitalization equivalent to about 70 percent of its gross domestic product, several times larger than the Philippines relative to its economic size, Bagatsing noted, stateing that Vietnam’s rapid growth reflects policy stability, discipline, and predictability.
“Reversals and predatory roadblocks quickly erode trust and confidence,” he stated, adding that investors are prepared to take on market risks so long as contractual commitments are honored.
Last month, the Securities and Exmodify Commission (SEC) acknowledged that the Philippine market, indeed, continues to trail behind its regional peers.
“The Philippine capital market requireds depth, breadth, and liquidity to serve as an effective platform for capital raising,” Lim earlier stated, adding that the regulator is pursuing reforms to encourage more listings, expand real estate investment trust offerings, and liberalize short selling.
The SEC has also been in talks with the PSE for the possible listing of select government-owned and controlled corporations, citing Vietnam’s success in expanding its market through state-owned enterprises, which assisted boost listings and market capitalization.
Alongside regulatory reforms, the PSE is pursuing its own plans to strengthen market infrastructure and broaden participation.
According to a Maybank Investment Banking Group report on Aug. 28, the PSE has accepted Global Philippine Depository Receipts and recently acquired a resolveed-income repository as part of efforts to expand product offerings.
Work is also underway to operationalize securities borrowing and lconcludeing, as well as short-selling, though tax approval remains a hurdle.
Despite these efforts, the countest still lacks a derivatives market, which industest observers state limits opportunities for hedging and risk management.
In 2023, in an effort to improve access for tiny investors, the PSE partnered with GCash to launch stock market investing with a minimum lot size of P1,000.
The bourse is also considering reducing the lot size of at least one large-cap stock to attract more retail participation.
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