THE BANKERS Association of the Philippines (BAP) expects the Philippine Stock Exchange (PSE) to submit this week a formal offer to acquire the Philippine Dealing System Holdings Corp. (PDS Group).
“I think we’re expecting a formal offer from PSE, so we expect that maybe (this) week, a formal offer. Then the board will take it up and study. We don’t know how much or anything,” BAP President Jose Teodoro K. Limcaoco told reporters.
“We have an internal valuation as I’m sure they have also, and I’m sure they’ll be far apart. But I’m sure we can come to an agreement. I’m sure price is not an issue or shouldn’t be a stumbling block.”
The PSE is eyeing the acquisition of up to 100% of the PDS, the operator of the Philippine Dealing & Exchange Corp. (PDEx), which caters to the fixed-income market by providing trading infrastructure.
The PSE currently has a 20.98% stake of the issued and outstanding capital stock of the PDS Group, while BAP members and institutions have a 21% stake.
If the sale pushes through, the PDS will be owned by the PSE.
“You’ll have the depository owned by the PSE and then PDEx, which is another exchange. Whether that remains a separate bond exchange or whether they fold that bond exchange into a bond and stock exchange, we’ll see,” Mr. Limcaoco said.
PSE President and Chief Executive Officer Ramon S. Monzon earlier said they are eyeing to finalize the takeover of PDS within the year.
In 2017, the PSE almost completed its takeover of PDS. However, the Securities and Exchange Commission blocked the transaction as it would breach the individual ownership limit provided under the law.
CHANGES TO BVAL?Meanwhile, Mr. Limcaoco said the Philippine BVAL (Bloomberg Valuation Service) can be improved but does not see the need to change it anytime soon.
“Any index should, first of all, be transparent, which means people can see where it comes from and how it’s calculated. An index also should be something that’s fairly liquid… and it should be something that’s reflective of the market, which means people can deal around it,” he said.
“Now, is BVAL that? It’s not perfect, but as long as market participants accept it and trade off it, then it’s an index. Can we come up with a better index today? I don’t think there’s one.”
The BVAL is administered by the BAP to be used as the Philippine peso government securities benchmark.
The BVAL reference rates are solely calculated by Bloomberg Finance Singapore L.P. and its affiliates, under an agreement with the BAP.
“I don’t think the current index is inappropriate today but like all indices, it can always be improved,” Mr. Limcaoco said.
“Because you need to deepen the markets, you need to deepen specific maturities… Can we have a very liquid five-year benchmark? Yes, but then we would have to make sure that we have a consistent and liquid five-year instrument. So that means some work both from the capital markets or with the National Treasury,” he added.
The BSP chief has been pushing for initiatives to deepen the capital markets. Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. earlier said that the BVAL is a “choppy yield curve,” noting the “lack of liquidity” in the curve. He proposed the potential use of swaps curve.
“If we have a swaps curve, maybe you need to make markets, perhaps in just one maturity, the five-year. Maybe that will be good enough. Somehow, this has not happened; the short end still seems problematic. We do not have a good repo [repurchase] market to tie down the short end,” Mr. Remolona earlier said.
“So, I would like to revive the swaps market, the IRS [interest rate swaps] market, and insist on the market making at least the five-year maturity — which is the sweet spot for fixed-income securities, corporate bonds, and derivative contracts,” he added. — Luisa Maria Jacinta C. Jocson
