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Monthly Archives: April 2013

Microfinance backed – Bangko Sentral supports greater depth in the Philippines

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By Julito G. Rada | Posted on Apr. 29, 2013 at 12:00am | 229 views

 

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The Rural Bankers Association of the Philippines supported the Bangko Sentral’s decision to raise the ceiling on microfinance deposits from P15,000 to P40,000.

“It is very encouraging to know that the rural banking industry and the BSP share the same vision of greater financial inclusion that will eventually create the much-needed push for economic development in the countryside. By increasing the deposit cap, we give rural depositors greater flexibility in saving their hard-earned cash,” RBAP president Edward Leandro Garcia Jr. said in a statement.

“Usually, depositors in rural areas are badly affected during emergencies because in such cases, they have limited financial capacity or at times totally devoid of money to be used for contingencies,” Garcia said.

Garcia said the increase in levels of micro-deposits did not only give the marginalized sector the capability to insulate themselves during inopportune times but also put them in a prime position to enhance their respective livelihood.

Micro-banking officers are allowed to collect payments, sell and market microinsurance products, receive and pay out authorized remittance transactions, act as cash in/out points for electronic money, receive utility payments, collect premiums, and pay out benefits, and purchase a limited level of foreign currency.

Financial Institutions’ holding in SKS Microfinance soars to 36 per cent

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Economic Times

PTI Apr 28, 2013, 11.15AM IST
(Despite a revival over the…)

NEW DELHI: Going bullish on the country’s only listed microfinance company, foreign investors have more than doubled their holding in SKS Microfinance to nearly 36 per cent over the past financial year with purchase of shares worth an estimated Rs 380 crore.

Foreign Institutional Investors (FIIs), which held 13.41 per cent stake in Hyderabad-based microfinance player at the end of financial year 2011-12, raised their exposure to 35.94 per cent as on March 31, 2013, as per the latest shareholding data available with the stock exchanges.

 

Philippines Stands Out in Capital Markets

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The Philippines has become one of Asia’s hottest markets for share and bond sales, getting a boost from a buoyant stock market and its recent acquisition of an investment-grade credit rating.

 

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Just four months into the year, companies owned by tycoon Lucio Tan and blue-chip giant San Miguel Corp.SMC.PH -1.28% have raised billions. Bankers expect more capital-raising in the months to come.

Deals totaling more than $1.5 billion are in the pipeline, and strong demand for recent sales could spark more activity in the country’s equities and bond markets. Overseas-listed companies with operations in the Southeast Asian country, such as casino operator Melco Crown Entertainment Ltd., MPEL +1.17% are taking advantage of an upbeat outlook for the Philippines’ consumption-driven economy to launch deals.

This month, the Asian Development Bank increased its forecast for the country’s 2013 economic growth to 6% from 5%. The Philippines has a population of 100 million.

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Agence France-Presse/Getty ImagesThe Philippines has become one of Asia’s hottest markets for stock and bond sales. Students earlier this month perform in the Aliwan Festival in Manila. The annual festival brings together performers from around the country to celebrate Filipino culture.

Last year, share sales totaled $3.5 billion, six times the $594 million raised in 2008, according to Dealogic data. Now, the country is in the third spot for equity fund raising in Southeast Asia, overtaking Malaysia, a favorite destination for deals last year.

In the debt market, the Philippines is leading in Southeast Asia, with about $8 billion raised so far this year. Last year, it was third.

Traditional fundraising hubs like Hong Kong have fallen behind so far this year as investors turn to Southeast Asia, where stock markets have surged on expectations of strong economic growth and rising domestic consumption.

The Philippines’ stock market has gained 20% so far this year, outperforming Indonesia’s 15%, Thailand’s 11% and Singapore’s 3.7%. The Philippines stock market has a market capitalization of more than $300 billion, and is dominated by family-owned businesses.

Many were forced to issue more shares in order to remain listed after the country’s stock-market regulator began to more strictly enforce a rule on minimum public ownership last year. The handful of listed companies that failed to meet the Dec. 31 deadline have been suspended from trading since January, and will face delisting if they don’t hit the 10% level by June 30.

Investors’ appetite for the Philippines is strong. Mr. Tan’s LT Group Inc.LTG.PH +0.64% raised 37.72 billion Philippine pesos ($917 million) last week. Orders for the stock sale totaled $3.5 billion. The deal was priced at 20.50 pesos per share, the top of the range banks handling the deal had indicated to investors. More than half came from 11 cornerstone investors—buyers who agree to take large parcels of shares and hold them for a set period—including Fidelity and Morgan Stanley Investment Management.

“Deals are getting bigger…the country is on the radar screen of investors,” said Lauro Baja III, head of UBS UBSN.VX +2.89% Philippines, which managed the LT Group share sale.

Foreign companies are also benefiting from investors’ confidence in the Philppines. Apart from a $377 million share placement by Nasdaq-listed Melco Crown, which is going on now, Malaysia’s Genting Bhd. 3182.KU +2.40% and its Philippine partner are planning to list a Manila casino via an initial public offering that could raise more than $500 million.

San Miguel, which is managed by Filipino tycoon Ramon Ang and manufactures the country’s top-selling beer, said its $800 million bond sale this month attracted orders of more than $1 billion within the first hour. Orders for the deal, which attracted investors from Asia, Europe and the U.S. and was the country’s largest corporate bond sale ever, totaled almost six times the amount of debt for sale.

Corporate bond offerings in the Philippines used to meet with tepid demand from investors. That changed in March, when Fitch Ratings raised the Philippines’ long-term foreign-currency credit rating by a notch to BBB-minus, an investment grade

“Of late, we are starting to see more [corporate] issuers,” said Clifford Lee, managing director of fixed income at DBS Bank Ltd. Other deals in the pipeline include a $500 million Tier 2 capital bond, to be issued by Metropolitan Bank & Trust Co.,MBT.PH +0.32% and a $170 million peso-denominated bond from geothermal power producer Energy Development Corp., EDC.PH 0.00% according to regulatory filings.

But at the same time that companies are stepping up their bond issuance, sales from the government, the usual bond issuer, are falling.

National Treasurer Rosalia de Leon said Tuesday the government won’t issue bonds overseas this year because it doesn’t want to add to inflows of capital that have strengthened the peso. The government will issue bonds domestically. The Philippines, one of the most active Asian sovereign borrowers, usually starts selling debt overseas in the first quarter but hasn’t offered any so far this year.

 

Write to P.R. Venkat at venkat.pr@dowjones.com and Cris Larano atcris.larano@dowjones.com

Peru The Best Place For Microfinance, Says The Economist

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LIMA, April 18 (BERNAMA-NNN-ANDINA) — Peru offers the best microfinance business environment for the fifth year running, as it maintained its first place in the global ranking, according to the Economist Intelligence Unit’s Global Microscope 2012.

The Andean country scored 79.8 out of 100, followed by Bolivia, Pakistan and the Philippines.

The report said that Peru remains in the number one position, resulting from a strongly competitive microfinance (MF) sector and sophisticated regulatory environment.

It also noted that the country’s regulatory framework for deposit-taking was strengthened, while the government continued to promote price transparency and financial literacy.

Peru’s credit bureaus also provide both reliable and comprehensive information on borrowers, the Microscope study showed.

In turn, Latin America still remains the best represented region in the study with 21 of the total 55 countries. Latin America has also continually performed the best among all regions included in this study.

After Stagnation, a Revival for Mexico’s Financial Sector

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BY ELISABETH MALKIN
The trading floor at J.P. Morgan in Mexico City. As Europe lags and America idles, Mexico's growth prospects are attracting international investors.Adriana Zehbrauskas for The New York TimesThe trading floor at J.P. Morgan in Mexico City. As Europe lags and America idles, Mexico’s growth prospects are attracting international investors.

MEXICO CITY — When Banco Santander held the $4.13 billion public stock offering of its Mexico subsidiary here last September, a mariachi band and Mexican folk dancers set the festive mood for a media breakfast in a sun-filled dining room atop the stock exchange’s skyscraper.

The offering — the largest ever in Mexico and trailing only initial public offerings from Facebook and Japan Airlines in terms of size in 2012 — was just one sign of the strong revival of the nation’s financial services sector.

Both global and local banks are jostling to underwrite stock issues. Mexican companies are looking for financing to help expand and make acquisitions. New structured finance products are attracting billions from local pension funds.

And with the continuing crisis in Europe and lackluster growth hurting the United States and other economies, Mexico’s growth prospects are attracting investment banks and investors hunting for ways to gain greater exposure to international markets.

“It’s the coming of age of the Mexican market,” said Eduardo Cepeda, J.P. Morgan’s senior country officer.

It is a marked change from just a few years ago, when the loss of manufacturing jobs to China and recession in the United States had left the country’s economy stagnant for the better part of a decade.

The current atmosphere is not without risks. For one, the new government has yet to present a convincing plan for tackling organized crime and drug cartels, which carry out kidnappings and gruesome killings that still dominate headlines. And persistent low wages in Mexico also serve to tamp down domestic demand.

Still, changes have taken place to foster optimism in the financial services industry. The new government of President Enrique Peña Nieto, who took office in December, has managed to recast the country’s image by moving vigorously on legislation to attack problems that are a drag on growth.

Even before Mr. Peña Nieto took office, prudent policies had whittled away government debt, built up foreign reserves, controlled inflation and stabilized the peso. Growth of about 4 percent in 2011 and again in 2012 outpaced Brazil.

“Investment bankers benefit from upswings and downturns,” said Mauro Guillén, a professor of international management at the Wharton School at the University of Pennsylvania. “Everybody is expecting a lot of deals in Mexico.”

The financial services industry is making up for lost time, jumping back into an emerging market that had long been overlooked. The sector’s growth is also being helped by an important new player in the local market: Mexico’s pension funds, which manage nearly $160 billion in assets. That figure is expected to double over the next six years, according to Carlos Ramírez Fuentes, the president of Consar, the government’s pension fund regulator.

“The Mexican financial system is still relatively small,” Mr. Ramírez said. “The resources are growing fast, and you need different alternatives for investment.”

Mexico created a pension plan 15 years ago that channels a percentage of each worker’s salary into a private fund, run by a manager called an Afore, a Spanish acronym.

For the first decade, Afores were limited to buying government debt. As regulators began to relax the rules, the funds diversified into corporate debt, and then into the stock market and structured finance instruments.

The pension funds continue to “redefine the capital markets” in Mexico, said Jaime Martínez-Negrete, the president of Morgan Stanley Mexico, which opened a broker-dealer in late 2010 to serve the local market. “It’s a market that is becoming more deep and broad in its products.”

To attract investment from those pension funds, Mexico’s stock market and the finance ministry created a special vehicle, a structured equity security known as a CKD.

The CKD allows investors to buy into a publicly traded fund that typically invests in infrastructure, real estate and private companies. Since they were first created in 2009, there have been 29 issues, worth about $4.8 billion.

A subset of the CKDs has been Mexico’s version of real estate investment trusts, known as Fibras. “There is enormous potential for growth and development for CKDs and Fibras,” said Gema Sacristán, chief of the financial markets division at the Inter-American Development Bank in Washington. “Mexico’s regulators should continue looking for new investment schemes and institutional investors.”

Luis Téllez, the president of the Mexican Stock Exchange.Adriana Zehbrauskas for The New York TimesLuis Téllez, the president of the Mexican Stock Exchange.

Mexico’s stock market is also showing signs of revival, although it is still relatively small compared to Brazil’s, its main rival in Latin America. With only a handful of new issues a year or even less, the stock market is worth just 46 percent of gross domestic product, compared with about 150 percent for Brazil, Luis Téllez, the president of the Mexican Stock Exchange, said.

But initial public offerings are showing signs of life. Mr. Téllez said he expected 15 I.P.O.’s this year, although the total amount they raise may be lower than in 2012 because of the size of the Santander deal. Last month, Sempra Energy’s Mexico subsidiary raised $600 million in the exchange’s third corporate I.P.O. of the year.

Also among this year’s offerings was the I.P.O. of Grupo Sanborns, the retail arm of the billionaireCarlos Slim Helú’s empire. It sold $950 million in shares to finance expansion.

Both foreign and domestic investors are buying the shares, Mr. Téllez said. “For foreign investors, it is very reassuring that there are Mexican institutional funds that can also take the paper.”

There are a number of more subtle factors working in favor of more stock offerings, bankers say. One of those is an evolution in the closely held family-owned businesses, which have been reluctant to list or have so few shares floating that they are very illiquid.

Another change may be a move by more multinationals, like Santander and Sempra, to sell shares in their subsidiaries in Mexico, where growth prospects are higher than at home.

Wal-Mart’s Mexican subsidiary, for example, which is the country’s largest private employer, trades on the Mexican exchange at about double the price-to-earnings ratio that Wal-Mart Stores trades at on the New York Stock Exchange.

“Right now, we have experienced the longest period in three decades of a continuous open window for equities,” Mr. Martínez-Negrete said.

The market for credit is also growing. After the peso crisis of 1994 sent Mexico’s banks into free fall, they were sold off to global banks. But the new owners were conservative about lending in Mexico. The banks are strongly capitalized and have complied with new international standards known as Basel III.

The government’s sound finances means it can issue 30-year bonds priced in pesos. Foreign funds are buying along with local ones. “This shows a lot of confidence in the currency and in the credit of the government,” Mr. Cepeda said.

For the first time in many years, local companies are generating cash and looking to expand at home and abroad, said Alfredo Capote, the head of investment banking at Banamex, Citigroup’s Mexico subsidiary. “Investors like these stories because there are very few stories of growth and consolidation around the world,” he said.

At the same time, foreign manufacturers are returning to Mexico as a production platform for the recovering American market. At the top of that list are global automakers, which are investing $10 billion in new assembly plants.

Mexico “has exported its way to prosperity,” said William H. Gross, the founder of Pimco, which has been accumulating Mexican sovereign debt over the last 18 months. “They now own dollars as opposed to owing dollars.”

A version of this article appeared in print on 04/05/2013, on page B5 of the NewYork edition with the headline: After Stagnation, a Revival for Mexico’s Financial Sector.