Some of our Philippine Giant Corporations and Conglomerates are seeking for investments from American based stock market investors, through what is known as ” American Depository Receipts” (ADRs)
ADRs are negotiable issued securities, by a US depository bank, for domestic buyers as a substitute for direct ownership of publicly traded stocks of a foreign company.
Depository receipts can be traded on USA trading venues, like in the New York Stock Exchange, and over-the- counter markets.
The Bank of New York ( BNY) Mellon, being one of the world’s largest depository for DRs, is being taped by SM Investments Corporation(SMIC) for funds of about $ 50 million worth to be traded in the trading shores of USA.
This is a similar funding strategy being done by infrastructure conglomerate Metro Pacific Investments Corp. ( MPIC) . Despite the low takeup, and low demand, MPIC will keep the ADR program. They find it ” negligible” that US investors are not that ” hot” in investing in the Philippines.
David Nicol, the Chief Finance Officer, was reported to have said, in a News Report, of The Philippe Star, last Aug. 12, 2013.. ” We’ll stick with the program. It does not cost us anything, but right now there’s nothing much happening” wrote Neil Jerone C. Morales of Business @ philstar.net.ph
MPCI has the advantage that many US investors tap the American based Fund Managers , for Investments directly into Metro Pacific, for their PPP & Infrastructure projects.
Unfortunately, The Philippine Stock Market is now going on a downward trend. Traders call this a ” correction”. But in reality, it’s the loss of confidence in the Economy. A possible reason is due to the resent ” pork barrel” scandals, were Billions of Pesos are lost, and have been stolen.
This Corrupt ,chronic and progressive, criminal practice is being done by some congressmen and senators, also a number of Civil ” Servants” and political groups , Government Agencies and Corporations..
The Economy suffers, when there is Corruption in Politics. Business confidence is low when Government does not practice it’s functions for the Common Good, particularly, in providing Social Services. That is why the Big Players, Conglomerates, and Tycoons are looking for investments overseas, specifically , in the USA. This is the case of SM Investments Corp. ( SMIC), that is in need for large Dollar Investments to fuel their expansions of Malls, infrastructures , PPP projects and the like.
However the trend continues. After Typhoon Maring flooded and devastated asian countries specially the Philippines. business stopped for 3 days, resulting to a big drop in the stocks. The real estate market registered the biggest loss.
Now, Capital flight from Asian economies may result in a significant increase in borrowing costs, which could lead to slower growth across the region” debt watcher Standard & Poor’s said.
S&P said that in most economies, the entry of foreign capital helped to sustain relatively high investment rates, improving economic growth.
“Most sovereigns are likely to see economic growth weighed down somewhat by modest-to-moderate increases in funding costs,” said Standard & Poor’s credit analyst Kim Eng Tan.
Unfortunately, most governments who allowed foreign capital into their economies, cautiously will have to worry about a sharp reversal of these flows,” S&P said in a report. “
S&P’s warnings come amid the recent volatility in financial markets caused by fresh speculation on the tapering of the US Federal Reserve’s bond-buying program.
The Fed which has been financing government debt and mortgages for several years by buying $45 billion in U.S. treasury bonds and $40 billion in mortgage-backed securities each month, is planning to scale back the $85billion bonds.
This bond buying program, introduced in late 2009, has kept US interest rates low, pushing investors to emerging markets in search of higher yields. But this is expected to reverse as the bond-buying program slows down and US interest rates start going up.
However, because of the speculation and the long wait on when is the exact timeline are causing panic and turmoil in the world economy.
In Europe, Germany’s DAX rose 0.1 per cent to 8,305 while the CAC-40 in France rose the same rate to 4,031. The FTSE 100 index of British shares was down 0.4 per cent at 6,425.
The Dow posted a five-day sequence of losses for the first time this year. The Standard & Poor’s 500 index fell nine points, or 0.6 per cent, to 1,642. The Nasdaq composite fell 13 points, or 0.4 per cent, to 3,599. Among stock markets, Jakarta fell almost nine percent in the four days ending Thursday, while Bangkok was down 6.5 percent over the same period.Manila slid 5.96 percent on Thursday, before rising 0.40 percent higher Friday.
In the Philippines the unwinding of the US Federal Reserve’s stimulus program, saw the peso plunge to a 19-month low at 44.31 to close at 44.26.
However, BSP Deputy Governor Diwa Guinigundo quickly acknowledged what he described as “some volatility” in the foreign exchange and equities markets.
He said “This is something that is driven more by market sentiment rather than the fundamentals of the macroeconomy of the emerging markets,”. “We should be concerned, but we should not be alarmed,”he added. In the Philippines, we have strong macroeconomic fundamentals.”
Our domestic credit-to-GDP (gross domestic product) ratio is 50 percent ompared to other Asian countries which is more than 100 percent.”Foreign debt was at 25-26 percent of GDP in the first three months of the year, down from 68 percent a decade ago.
Most loans have long-term maturities of about 20 years, he added. “Credit is growing in emerging markets because economic activities are very resilient and robust,” he said, adding that when the economy is growing, “you see that credit is growing. That does not lead to greater vulnerability.”
However, I wish to warn the Business, Banking, Finance and Real Estate Industry that our extra liquid situation. Does not necessarily mean that we are in a healthy and stable Economic situation today.
I would like to advice, the need to focus first on strong domestic fundamentals. To avoid to much leverage, but instead, allow cash flow And owners equity to fuel development growth.
We need to focus on Production, and the Manufacturing Industry. Create Jobs, and avoid too much speculation in the Real Estate sector.
With this, we will avoid having to run to the USA for funds. It is not wise to borrow in US Dollars. Our Peso is getting weaker and will get weaker, due to the Currency ” wars” that we are now undergoing in some parts of ASIA.
Therefore, the Filipinos conquering the United States of America, is not only in terms of Migration, Heathy Population Growth ( people power), but also in terms of sourcing Funds and Investments for our sustainable growth and development.