Banks urged to help spur capital market growth

MANILA, Philippines –  The new president of the Philippine Stock Exchange (PSE) is urging the banking community to take a more active role in spurring the growth of the capital market.

In a teleconference yesterday, Sicat said the bourse is hoping that the commercial banks could provide more market liquidity by extending credit to individual or corporate investors.

“One of the challenges we have as a country is that the market is not able to benefit from a relative leverage from the banking system. There’s limited liquidity in the market. We’re trying to involve the higher participation of the commercial banking sector,” he said.

“While the banking system has been successful in reducing their non-performing loans, there’s not enough cash that flows into the market,” he added.

Sicat said another challenge facing the PSE is the issue of corporate governance.

He said one of his top priorities now is to put the house in order by stabilizing the organization and filling a large void of senior management positions.

Sicat said he works at the pleasure of the board as he doesn’t have a fixed term unlike his predecessors who had inked a management contract of at least two years.

“The challenge there is for me to do my job. There’s just so much work to be done,” he said.

To ensure good corporate governance among listed corporations, the exchange is revisiting its disclosure rules to come up with a uniform and updated set of rules.

Sicat said the exchange has given companies that fell short of the required minimum public float to comply with the rule before the end of the year.

“We have given them 12 months from October or November 2010 to meet the requirement. Failure to do so could result in the imposition of administrative fines or delisting. But I don’t think these companies would want to take that route,” he said.

There are currently 40 listed companies whose public float fall below 10 percent.

As far as real estate investment trusts (REITs) are concerned, Sicat said he is hopeful that the final implementing rules would come out within the year, allowing the trading of these instruments.

Sicat said the exchange is looking to launch the Maharlika Board, a new listing board that will feature companies adhering to strict corporate governance standards. The proposed criteria for listing in this segment include a minimum float of 30 percent and an increased number of independent directors to three, as compared with the minimum of two independent directors as provided in the existing law,” Sicat said.

In addition, Sicat is hopeful that plans to form an ASEAN electronic trading link will finally push through. Five ASEAN exchanges, namely Bursa Malaysia Berhad, Indonesia Stock Exchange, Philippine Stock Exchange, Singapore Exchange and The Stock Exchange of Thailand have signed a memorandum of understanding (MOU) to develop this linkage to enhance the competitiveness of their capital markets. This e-trading link, through one single access point, allows intra-ASEAN cross-border trading and will attract more international funds into ASEAN.