The much-awaited giant initial public offerings (IPOs) of SM Prime Holdings’ real estate investment trust and Prime Infrastructure Inc. of billionaire Enrique K. Razon Jr. may not happen this year.
In an online briefing, Abacus Securities Corporation Research Head Raymond Neil “Nicky” Franco noted that another anticipated major IPO, that of Globe Telecom’s financial technology firm Mynt, may be listed overseas instead of at the Philippine Stock Exchange (PSE).
Franco said this is based on the pronouncement of PSE President Ramon S. Monzon that the bourse is expecting to generate P40 billion from the listing of about six IPOs this year.
“So this means that the five or six companies that will raise funds through an IPO this year, will average only about P8 billion or so in terms of capital raising each,” he said
“So basically, that really precludes SM Prime infra which are looking to raise about a billion dollars for SM REIT and Prime Infra which is a very large number as well,” he added. Prime Infra earlier said it may raise as much as P33 billion.
For Mynt, Franco said, “recall that management said consistently said last year that they want to be IPO ready by the end of 2023. So definitely they would have already done a lot of groundwork preparatory work for that.”
“And we believe that odds favor that Mynt will list this year. But it will be done overseas, unfortunate for us. But I think that it will be positive for Globe in the long run, because they really need the capital to continue their aggressive expansion strategy,” he also said.
Despite the low IPO turnout expected, Franco said the local stock market is poised for a “leap” this year amid improving fundamental though some hiccups are still on the horizon.
In particular, he said the economy may “undershoot” the government’s six percent GDP growth for 2023 with the fourth quarter figure likely at the lower end of the target.
“And we’re actually looking at 5 percent for 2024,” he said, noting that the economy is still reeling from last year’s “lingering impact” of tight monetary policy, as well as the “very high rice prices, El Nino and China’s weak economy.”
He noted that while inflation is subsiding, there is a likelihood of an uptick by March or April as the base effect of the much higher inflation last year disappear by the second quarter of the year.
“As you probably remember, from late 2020 to early 2023, high vegetable prices, particularly for onions, cause significant increase in headline inflation. However, the base effects from high vegetable prices will practically disappear by around March or April of this year,” said Franco.
“On the other hand, price pressures from rice, the price pressure from rice is likely to stay at the current level of 19.6 percent or go even higher, because of tight supply globally, but especially tight supply coming the Philippines primary supplier, which is Vietnam. So what we’re saying is that when the positive base effect from vegetables disappears, by March or April, then the negative impact of high rice prices is going to take over even though we expect February inflation to be at for close to 3 percent,” he explained.
He said inflation could hit five percent by the middle of this year or by the third quarter and “we cannot rule out that inflation may actually go back to as high as six percent later this year.”
“On the other hand, depressed oil prices, depressed coal prices will help temper the rise in headline inflation. But simply put rice prices is going to be a big factor moving forward. And this includes not just for inflation, but for the consumer sector as well,” he added.
Franco however said the Bangko Sentral ng Pilipinas (BSP) is likely to cut rates by “at least 100 basis points and up to 150 basis points” this year, with the first cut happening by May.
“This is following the potential for the (US) Fed to cut its own policy rate by as early as March. Currently, I believe that the odds for a rate cut from the Fed in March is at about 70 percent. So that’s a very good number to bet on. And if the Fed does follow through and cut rates in March then we believe that the BSP will will start to ease rates in May,” he said.
“Now, I think there was already a minor signal or minor pivot signal from the BSP recently when (BSP) Governor (Eli) Remolona stated that there’s already less need for forex intervention because of falling inflation and a weaker dollar,” he added.
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The article was originally published in Manila Bulletin and written by James A. Loyola.
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