LOOK: PSE net earnings down 71% as shareholders turn to cash

The Philippine Stock Exchange, Inc. (PSE) booked a 71% drop in its first quarter bottomline to P50.62 million as investors opted out of the market due to the coronavirus disease 2019 (COVID-19) pandemic.

In a statement Wednesday, the operator of the local bourse said its revenues during the three-month period dipped 0.4% to P294.72 million because of the ongoing crisis.

The huge toll on its net income came from the 184.3% plunge in other income, which it traced to lower fair value of investments and lower interest income.

“The COVID-19 pandemic definitely affected our revenues for the quarter. Investors opted to be liquid and hold on to cash, hence, the slowdown in trading activity,” PSE President and CEO Ramon S. Monzon said in the statement. “Issuers also opted to put on hold fund raising plans.”

He noted the PSE may continue struggling in the coming months as investors remain cautious over the COVID-19 pandemic and corporate earnings for the second quarter.

“Meeting our original target for capital raising will be quite a challenge as most companies would probably be reducing their capital expenditures and defer their expansion plans for the rest of the year,” Mr. Monzon said.

“The only silver lining would be if banks become more strict and selective in their lending policy and listed companies who need funds have no choice but to raise the same from the equities market,” he added.

Mr. Monzon told reporters in December the PSE was setting a capital raising target of P150 billion for 2020, up more than 50% from the P95.22 billion capital it raised in 2019.

In the first half of 2020, the PSE said it raised a total capital of P20.83 billion, coming from one initial public offering (IPO), one follow-on offering, one stock rights offering and two private placements.

Among the PSE’s initiatives to spur market activity is amending its listing rules, relaxing requirements to open the stock market to more corporations for fundraising. It said it was also exploring new digital services that would cater to new behaviors that are being born during the pandemic.

In a separate statement, the PSE said it hopes to see two to three more capital raising activities at the stock market this year. So far, there were only MerryMart Consumer Corp.’s initial public offering and Altus Property Ventures, Inc.’s listing by way of introduction.

“Hopefully, these two new listings will help prop up trading activity even as we await the listing of the first REIT (real estate investment trust) IPO,” Mr. Monzon said.

The bourse operator also said the PSE index slumped 20.6% in the first half of 2020 as an effect of the pandemic. But compared to the first quarter, the PSEi rose 16.7% as of end June and improved 34.3% from its lowest for the year of 4,623.42.

“While the index may have recovered from oversold levels it has not been able to climb back to its pre-COVID-19 levels indicating that investors are still quite wary about the full impact of the virus on the economy and are concerned that the number of cases continue to increase despite the various community quarantine regimes we went through,” Mr. Monzon said.

Daily average value turnover fell 15.9% to P6.59 for the six months. Foreign investors stood as net sellers with net outflows reaching P68.44 billion, a turnaround from last year’s net foreign buying of P21.26 billion.

“Even if there are attractive bargains in emerging markets, foreign institutional funds prefer to sit it out. Fortunately, local investors readily took over the buying momentum and kept our market resilient. In April and June, we noted that locals were responsible for 53.0 percent and 58.9 percent of value turnover,” Mr. Monzon said. — Denise A. Valdez|BusinessWorld

Source: Peso Economics