Analysts welcome stock exchange move to unify markets

THE Philippine Stock Exchange’s (PSE) acquisition of a controlling stake in Philippine Dealing System Holdings Corp. (PDS) will boost confidence in the domestic capital market, analysts said.

The PSE announced late Thursday that it had signed agreements to purchase a total of 3.87 million PDS shares worth P2.32 billion, equivalent to a 61.92-percent stake, that would add to an existing 20.98-percent interest.

The transaction cost was said to have been based on PDS’ enterprise value of P3.75 billion.

Term sheets were signed with the Bankers Association of the Philippines (BAP) for its shares and those owned by BAP Data Exchange Inc. and certain member-banks for a 28.83-percent stake, along with Mizuho Bank Ltd. for its 0.08-percent interest.

Share purchase agreements were also inked with Singapore Exchange Ltd. for its 20-percent stake; Whistler Technologies Inc. (8 percent); San Miguel Corp. (4 percent), Investment House Association of the Philippines (0.65 percent) and Golden Astra Capital Inc. (0.36 percent).

PSE President and CEO Ramon Monzon said “these signed agreements bring us a step closer to achiev-ing our objective of consolidating the equities and fixed income exchanges and realizing the synergies and efficiencies from this unified setup.”

“This will also allow us to be instrumental in the growth and development of the Philippine capital mar-ket with the introduction of new products for various stakeholders as well as the implementation of risk management processes,” he added.

The PDS Group owns Philippine Dealing and Exchange Corp., the operator of the fixed income ex-change, and Philippine Depository and Trust Corp., which serves as the depository for equities and fixed income securities.

China Bank Capital Corp. Managing Director Juan Paolo Colet said the deal was “long overdue” and that “an integrated bourse would enable the PSE to offer efficient listing and trading solutions across a va-riety of securities, including equities, bonds, and eventually options.

“Hopefully this leads to a deeper and more active secondary market for bonds and other fixed income instruments.”

BDO Capital and Capital Market Foundation Development Inc. President Ed Francisco, meanwhile, said there would be “synergies” and that the acquisition would hopefully “spur capital market develop-ment.”

Rizal Commercial Banking Corp. chief economist Michael Ricafort said that consolidation and unification would “further simplify fundraising activities/procedures by local companies coursed through the local bond and stock markets.”

“A more unified local capital market would also make it more convenient for both local and interna-tional investors, instead of dealing with more and different trading/market exchanges and regulators,” he added.

Unicapital Group research head Wendy Estacio-Cruz, for her part, said “the PSE’s move to unify the capital markets signals a strong commitment to modernizing the country’s financial market ecosys-tem.”

She added that fewer silos and a more interconnected market could improve investor confidence, fos-ter greater financial inclusion and support economic growth.

“However, for the integration to achieve its full potential, regulators, policymakers and the PSE itself must ensure a transparent and fair implementation process while addressing concerns around gov-ernance, technology and market competition,” Estacio-Cruz continued.