IPOs likely to regain momentum next year

By Ashley Erika O. Jose, Reporter

MARKET WATCHERS expect initial public offerings (IPOs) to regain momentum in 2024 once the Philippine central bank begins rate cuts.

“The Philippine stock market is poised for a resurgence in initial public offerings in 2024, buoyed by declining interest rates amid easing inflationary pressures,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message to BusinessWorld on Wednesday.

Mr. Arce noted that discussions are underway for a minimum of six IPOs next year, “doubling the number of firms that went public this year and significantly surpassing them in terms of the funds they aim to raise.”

The Philippine Stock Exchange, Inc. (PSE) had earlier targeted 14 IPOs this year, but only three companies went public. Renewable energy holding firm Alternergy Holdings Corp. held its IPO in March, followed by IT-product retailer Upson International Corp. in April, and renewable energy developer Repower Energy Development Corp. in July.

Several companies initially planned to go public this year but postponed their plans to 2024. These include Citicore Renewable Energy, property developer Ovialand, Inc., and Razon-led Prime Infrastructure Capital, Inc.

The Sy-led SM Investments Corp. also deferred the launch of its real estate investment trust (REIT) arm to next year.

“The prospect of an initial rate cut could serve as a signal for companies to pursue IPOs, as investors may turn to riskier assets such as stocks for higher yields,” Mr. Arce said.

“The central bank is anticipated to commence lowering the benchmark rate in September 2024, though the timing could be influenced by actions taken by the US Federal Reserve,” he added.

The Monetary Board last week kept its benchmark rate at a 16-year high of 6.5% for a second straight meeting. From May 2022 to October this year, the Bangko Sentral ng Pilipinas (BSP) raised borrowing costs by a cumulative 450 bps to tame inflation.

On Wednesday, BSP Governor Eli M. Remolona, Jr. said that the central bank is unlikely to cut rates in the next few months, adding that rates may have to stay “higher for longer” as inflation remains elevated.

“Higher interest rates can attract investors away from equities, including IPOs, as they may seek the greater security and guaranteed returns offered by other instruments like bonds or fixed-income funds,” Mr. Arce said.

Some analysts expect the BSP to maintain the benchmark rate at 6.5% through the first half of 2024.

“Big IPOs will wait until interest rates have declined significantly and the stock market is at higher levels, as that kind of environment would be more conducive to investor appetite and better valuations,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message on Wednesday.

AB Capital Securities, Inc. Vice-President Jovis L. Vistan said he expects a “positive market” in 2024 as the Philippines is expected to be one of the fastest-growing economies.

“This positioning is likely to capture the attention of global investors, particularly as interest rates may have topped out already, making equities more appealing and encouraging investors to embrace higher-risk opportunities,” he said in a Viber message.

Mr. Vistan said he expects REITs, as well as companies in the energy and industrial sectors, to conduct IPOs next year.

“We think that the market’s reception to the first IPO in 2024 would set the tone for succeeding potential listings,” Rastine Mackie D. Mercado, research director at China Bank Securities said in an e-mail.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said if investor sentiment improves, then it will likely result in “a healthy number of successful listings [next year.]”

“However, uncertainties prevail, and challenges such as global economic shifts, regulatory changes, or geopolitical events could impact IPO activity,” Mr. Limlingan said.

The PSE earlier said it is anticipating at least four big IPOs in 2024.