The Philippine Stock Exchange plans to introduce trading of global depositary receipts in the first quarter of next year, in an effort to lure demand from local investors seeking better equity returns offshore.
There’s “significant interest” from prospective issuers and custodian banks in the peso-denominated instruments that represent shares in foreign-listed companies, exchange president and chief executive officer Ramon Monzon wrote via email.
“We are actively working to introduce a final set of rules with an appropriate balance between investor protection and operational ease,” Monzon wrote. Proposals to expand the list of eligible issuers and ease disclosure requirements are being considered, he said.
The Philippines is moving to broaden links between its capital markets and the rest of the world as US stocks round out a bumper year amid optimism President-elect Donald Trump will deliver pro-business policies including tax cuts.
Trump’s November election victory and his “America First” rhetoric have prompted some global funds to cut holdings of shares in emerging markets such as the Philippines.
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The Asian nation’s main stock index is the world’s worst performer this quarter, dropping more than 11% as the peso has slumped against a surging US dollar.
Several other stock exchanges in the region already allow trading of global depositary receipts. More than 40 different GDRs were traded Friday on the Stock Exchange of Thailand, according to data on the bourse’s website.
Investors in the Philippines will likely have some appetite for GDRs, particularly those related to US technology stocks, said Juan Paolo Colet, managing director at Chinabank Capital.
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The securities may also be used as a form of currency hedge on expectations of a stronger US dollar, he said.
“Right now, a lot of Filipino stock market investors are seeing that the best equity returns are being printed offshore, especially in the US,” Colet said. “They are trying to find ways to ride that rising tide.”
Chart: Bloomberg
