Deeper liquidity in bond markets a must for investors

The Philippines needs to deepen the liquidity in its bond markets to support foreign investors with projects in the country, an official from Japanese firm Nomura Securities Co Ltd said.

“We need to develop the local bond market because in infrastructure, the revenues are local currency for foreign companies. It’s very difficult for them to invest in foreign currency because of the currency risks,” Julius Caesar Parrenas, senior adviser at Nomura, said in a briefing late last week.

“But if you have a local currency bond market, they can raise the financing from here and invest that in infrastructure,” he said.

Parrenas made the comment especially for firms investing in the country’s PublicPrivate Partnership (PPP) program, meant to address the infrastructure needs in the Philippines.

He said while regulators have been continuously developing the local bond market, more measures should be in place to allow for more financial instruments and to make it easier for more investors to tap the market.

“One of the most important thing is the liquidity of the bond market… the thing is, there are not enough buyers and sellers so you need more diverse issuers, sellers, and the kind of financial instruments that will allow investors to hedge,” Parrenas said.

The Aquino administration has so far awarded 10 projects worth around P189 billion under its PPP program. These projects include major expressways, extension of railway systems, classroom projects, and airport improvement and expansion programs.

There are currently 13 more PPP projects to be auctioned in the next months.

Parrenas said the government should work on bringing agencies and local government units together for better coordination on PPP projects. He added this has been partly addressed with the creation of the PPP Center although cooperation between local governments and implementing agencies should still be achieved to create better projects.