IPO chances slim in 2023, says FMIC

MANILA, Philippines — Companies taking their fortunes public this year face choppy waters, as market conditions remain tepid in 2023 as First Metro Investment Corp. sees it.

In an online briefing on Wednesday, the investment banking arm of the Metrobank Group explained that the market maintained its patient posturing. Already, Ovialand Inc. deferred its initial public offering earlier this year since market conditions here and abroad were not conducive.

“For the rest of 2023, I think the chances are slim, it’s July. Christmas is close, you only have what, until November?” said Dan Camacho, executive vice president and investment banking group head. 

“We’re looking forward to the comeback next year,” he added. 

FMIC’s briefing underscored that the equity market could turn rosy in 2024, signalling “potential investment opportunities” as they awaited the return of IPOs and real estate investment trusts into the market. 

“This is from a combination of lower interest rates and good equity values resulting from strong corporate earnings growth, providing upward momentum to the PSEi,” FMIC added. 

Markets at home and abroad are at a standstill of sorts, as headwinds, characterized by expectations of economic recessions, higher interest rates and rising inflation, left conditions in familiar territory. As it is, equities everywhere are still recovering from the damage left by the pandemic on the global economy.

So far, two companies have gone public in the local bourse this year. Tech retailer Upson International Corp. and renewables firm Alternergy Holdings Corp. have led the way, as the PSE is targeting 14 IPOs in 2023.

Even then, FMIC anchored their expectations on the Philippine economy sustaining growth to support the Philippine Stock Exchange. UA&P economist Victor Abola, who presided over the macroeconomic outlook briefing, projected the domestic economy to churn at a slower 5.6% in the second quarter. 

The Philippine economy expanded 7.5% in the second quarter of 2022, benefitting from low base effects and a boost from election-related spending. 

That said, Cristina Ulang, head of research at FMIC, explained that the local bourse’s recent performance pointed to the resilience of local shares. 

“We’re very resilient, we’re not a laggard, it’s a boring market,” she said. 

Ulang explained that one of the biggest hurdles to the market, and the economy by extension, is rising inflation. Consumer price growth hit 5.4% in June, decelerating from the recent 14-year highs as the impact of expensive borrowing costs seeped into the domestic economy. 

Inflation across the country’s regional neighbors already tallied below 5.4%, according to Ulang, while interest rates hovered below the BSP’s current 6.25%. 

“Recommendation is to position now while sentiment is still negative,” she said. — Ramon Royandoyan