MANILA, Philippines - Finance Secretary Cesar V. Purisima wants to see more of the top 5,000 corporations tapping the bond market for funding rather than borrowing from banks.
During the launch of the Asian Development Bank’s March 2013 issue of the Asia Bond Monitor, Purisima underscored the need to strengthen the bond market, which he said, is a key element, along with the banking system and the equity market, of a well-developed financial system.
Purisima said the development of bond markets reduces dependence on bank financing enhances the effectiveness of monetary policy, and spreads corporate risks.
“We don’t want our banks to be saddled with NPLs (non-performing loans) and create risk for the banking system. That’s why it is important for the bond market to grow,†Purisima said.
About 87 percent of the outstanding bonds issued in the country represented government securities and only 13 percent were corporate bonds.
Only 30 Philippine companies accounted for 93.5 percent of the total amount of Philippine peso corporate bonds outstanding.
While the volume of corporate bond issuances rose last year, Purisima said there was still room for improvement.
“The bond market is an important pillar if we are to build sustainable infrastructure for Philippine growth. An efficient capital market is crucial if we are to intermediate savings at the lowest possible cost,†Purisima said.
Bonds account for a 21.1- percent share of Philippine domestic financing while the total outstanding size of the Philippine peso bond market is 37.7 percent of GDP.
According to the ADB, the peso bond market grew by 7.5 percent quarter on quarter and 20.5 percent-year-on-year in the fourth quarter. Although, at the equivalent of $100 billion in size, it is still one of the smaller markets in emerging East Asia’s $6.5 trillion local currency bond market.
Purisima stressed the need for Asian capital markets to manage their wealth flows so that savings contribute more to growth in home countries.
“Bond market development is also important so that instead of recycling capital and excess savings of the region in western markets, they are recycled here in the region. For the Philippines for example, some funds that our Central Bank invests in do not have the Philippines as an acceptable investment destination,†he said.