Non-deal roadshow set in New York, Boston, L.A.
Central bank and finance officials have embarked on a task of sending out the message of long-term sustainability of the Philippines’ economic gains to US-based portfolio investors.
In a non-deal roadshow set in New York, Boston, and Los Angeles from March 4 to 9, the officials were scheduled to meet with executives from 18 asset management companies with the aim of sharing the Philippines’ positive economic narrative.
The Philippines used to suffer from stubborn speculative credit ratings. But under the Aquino administration, the economy finally has secured investment grade sovereign credit ratings in 2013 from the three major international credit rating agencies — Fitch, Standard & Poor’s (S&P), and Moody’s — which cited significant improvement in its macroeconomic fundamentals and governance standards.
This was followed by another upgrade in 2014 by S&P and Moody’s to BBB and Baa2, respectively, which are both a notch above the minimum investment grade. These ratings are assigned a “stable” outlook.
The turnaround in the Philippines credit story has led to lower interest rates on debt papers of the Philippine government, thereby reducing its borrowing cost.
The investment grade ratings also have influenced a decline in commercial lending rates, allowing businesses and consumers in the country to more easily access financing.
The pending May elections, however, may have raised questions on sustainability of the country’s economic achievements.
Taking a proactive stance of making foreign portfolio investors well informed of the positive economic outlook for the Philippines and the factors supporting this outlook, officials from the Bangko Sentral ng Pilipinas (BSP), the Department of Finance (DOF), and the Investor Relations Office (IRO) visited the US-based asset managers.
Finance Secretary Cesar V. Purisima led the team in the New York leg, while National Treasurer Roberto Tan took the lead in the Boston and LA legs. BSP Deputy Governor Nestor Espenilla Jr. joined the team in New York and Boston,
The United States is one of the key markets for Philippine debt securities.
Finance Secretary Cesar V. Purisima said, “Restoring confidence in the Philippines is a large part of why we are riding this virtuous cycle today. As we work towards sustaining reforms to continue being Asia’s resilient bright spot, the work endures.”
“With 24 positive credit rating actions behind us–the most among any sovereign in the past 5 years, we’re all hands on deck in strengthening confidence in our country,” Purisima added.
National Treasurer Roberto Tan said, “In the fiscal sector, including the area of liability management, both legislative and administrative reforms instituted over the years will help see to it that the Philippines stays on the path of a declining debt burden.”
“In turn, the continually widening fiscal space will allow the government to invest even more in infrastructure and social services for a sustainable and inclusive growth,” Tan added.
BSP Deputy Governor Nestor Espenilla Jr. remarked: “The Bangko Sentral ng Pilipinas, which enjoys policy independence and fiscal autonomy under the law to pursue its mandates, is one source of policy continuity that bridges transition in political leadership.”
“Key structural reforms implemented in the areas of monetary policy and bank regulation will help the economy continue to enjoy price and financial-system stability, which are both crucial in helping maintain a robust and stable economic growth for the long term,” Espenilla added.
The Philippine delegation cited efforts to institutionalize economic and governance reforms, such as through administrative measures and legislation. These reforms will help ensure sustainability of the country’s economic gains despite changes in political leadership.
Among the major legislative reforms are the Sin Tax Reform law, the Foreign Banking Liberalization Act, amendments to the Cabotage law, the Tax Incentives Management and Transparency Act, amendments to the charter of Philippine Deposit Insurance Corp., and the Philippine Competition Act.
Among the administrative measures are rules rationalizing and making more transparent the budget process, strengthening of the Public-Private Partnership (PPP) program, enhancement and modernization of the procurement processes for better transparency, regulations that expand the taxpayer base for improved revenue collection, and regulations that make credit more accessible to micro, small, and medium enterprises (MSMEs) and to low-income households.
The roadshow in the US was part of an overall effort to help maintain investor confidence in the Philippines, which has become one of the fastest growing emerging markets in the world.
Its gross domestic product (GDP) grew by an average of 6.2 percent from 2010 to 2015. For this year, the government has set a GDP growth target in the range of 6.8 to 7.8 percent. The International Monetary Fund estimates that the Philippines’ GDP growth potential for this year is at 6.5 percent.
The Philippines annually conducts non-deal roadshows (NDRs) in key financial centers globally to touch base with existing and potential foreign investors. NDRs are considered an international best practice for investor relations.
The Institute of International Finance (IIF) includes the conduct of roadshows as one criteria in assessing a country’s investor relations program, as these provide opportunity for investors to directly ask government economic officials pressing questions related to a country’s credit and macroeconomy
The latest roadshow was arranged by Citi, Credit Suisse, Deutsche Bank, HSBC, JP Morgan, Morgan Stanley, Standard Chartered Bank, and UBS.
