Finance Secretary Carlos Dominguez III has said the use of digital tools to make the process of issuing and buying debt securities cost-efficient, convenient and more accessible to both issuers and retail investors will democratize bond investing and help deepen the Philippines’ capital markets.
Dominguez said the pioneer listing on Tuesday morning of the corporate bond offer of Ayala Land Inc. (ALI) in the capital market and the Philippine Dealing & Exchange Corp. (PDEx) using the electronic Securities Issue Portal (e-SIP) is notable not only because it marks a milestone in the digitalization of the country’s capital market, but also because the issuance is a “testimony to the strength of the country’s fiscal and financial position.”
This strong framework enables the Philippine financial market to maintain a low-interest rate environment, “which makes financing investments cheaper and will help power our strong economic recovery,” Dominguez said.
Dominguez commended the Philippine Dealing System Holdings Corp. (PDS) Group for its “excellent response” to his earlier challenge for the PDS to promote greater financial inclusion and help deepen the country’s capital markets through the e-SIP project.
“This electronic system democratizes bond investing. By moving towards digitalization, we are taking away the pain points that discourage companies and retail investors from participating in the capital markets. We are making processes more cost-efficient for everyone,” said Dominguez at the listing via e-SIP of ALI’s P10-billion corporate bond offer.
The fixed-rate bonds, which will mature in 2025, were issued by ALI to take advantage of low interest rates in order to retire its old debt.
“I congratulate Ayala Land for this pioneering electronic issuance. I wish the best for this offering and hope it will lead us to many more similar listings over the next few weeks and months,” Dominguez said.
“Let us continue taking bold steps forward towards a more efficient and more vigorous capital markets system,” he added.
Dominguez said that while achieving the full digitalization of the capital markets will make financial trading more efficient and competitive in the country, safeguards should be put in place to protect e-SIP and other digitalized initiatives from potential cybersecurity threats and other risks.
He noted that e-SIP will not only digitalize the capital markets but would also be beneficial to the environment, as it would do away with voluminous paper-based submissions, which would save millions of trees.
The e-SIP project could also “dramatically generate more liquidity in the market” because it would eliminate the paper-based submission of requirements, which contributes to friction costs in financial transactions, Dominguez said.
“More importantly, this would help fulfill the Duterte administration’s goal of broadening financial inclusion,” he said.
The e-SIP, which is a first in the country, went live last April 21.
It allows the online registration and processing of documents in the primary market, clearing the way to the streamlining and digitalization of transaction flows in the capital markets.
The e-SIP portal would also allow investors to make their reservations for the bond issuances through electronic means and enable issuers to expand their reach by selling their securities online.
The e-SIP project also reduces the time for the submission of the issuer’s requirements from three days to only one day, allowing more time for distribution.
According to the PDS, the next step in the e-SIP project is to digitize the paperwork-heavy pre-settlement processes in the corporate bond secondary market.