Philippine Stock Exchange urges small firms to enlist to lure buyers

LOCAL small and medium enterprises (SMEs) in need of a strong capital infusion are encouraged to have their companies publicly listed in the stock market through an Initial Public Offering (IPO).
An IPO is the first sale of a corporation’s common shares to public investors.
“It’s one way to attract investors and raise capitalization,” said Philippine Stock Exchange (PSE) president and chief executive officer Francis Lim.
Lim said service-oriented companies, such as power, and property developments, are potential investors in the stock market.
“Cebu is a key area in the PSE because of the strong presence of SMEs in the province,” he told Sun.Star Cebu.
Melchor Guerrero, PSE capital markets development division vice president, said SMEs being publicly listed brings “prestige and goodwill” because once visibility of market performance is enhanced, buying and selling becomes easier.
Guerrero added that other benefits include an established value in mergers since it is easier to gauge the value of the company, and it facilitates subsequent debt financing.
Meanwhile, Lim said while an IPO is an “attractive” investment, most Filipino companies are “scared” to go public and invest in the stock market, in general, because of volatile nature of the financial markets.
Lack
He said only one percent of more than 80 million Filipinos are actively investing in the stock market either due to the lack of information about the stock market or because of the high cost of going public. However, Lim said he can assure potential investors that with the PSE’s “strong performance” last year, SMEs who plan to apply for an IPO will start earning even on the first day they will go public.
Data from PSE revealed that the average daily value rose to 48.71 percent from P1.56 billion in 2005 to P2.32 billion last year.
Growth
Market capitalization also increased from P5.95 trillion in 2005 to P7.7 trillion in 2006, or a 21 percent growth rate.
The total capital raised for 2006 was at P57.22 billion, which according to Lim, was the highest capital raised since 1994 when the PSE was granted a license to operate by the Securities and Exchange and Commission.
The same data also showed that foreign investors bought 68.89 percent of stocks from PSE, where from P206.88 billion in 2005, it grew to P348.97 billion in 2006.
“I am optimistic the 2007 data will outperform that of 2006 because more people are now excited about the stock market,” Lim said.
He added that the “stable” strengthening of the peso is continuing to draw both local and foreign investors to the stock market.
Lim, Guerrero, and other officials of the PSE were in Cebu recently for the seminar “Raising Capital Through IPO: How companies can tap the fundraising promise of IPOs.”
The pioneering seminar was organized by the Punongbayan and Araullo, an accounting, tax and business advisory firm, in collaboration with the PSE capital markets group.
Representatives of Aboitiz Power Corp., InfoWeapons, Camiguin Beach and Country Club Inc., and Machine Systems Corp., among others, were in attendance.
Lim said PSE will continue to hold financial management seminars in the province in hopes of luring more players to invest in the stock market.