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BSP urges foreign investors to invest in local capital market |
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By Des Ferriols
The Philippine Star 03/10/2005 The country needs a large pool of institutional investors to jumpstart the domestic capital market and attract strong issuers to expand the variety and supply of instruments available for investments. The Bangko Sentral ng Pilipinas (BSP) urged foreign investors to take the leap even as the government struggles to complete its reforms intended to improve the country’s investment conditions. BSP Governor Rafael B. Buenaventura told the Australian-New Zealand Chamber of Commerce in the Philippines (ANZCHAM) that developing the capital market was the long-term solution to the country’s economic and fiscal woes. "We are in need of a larger pool of institutional investors like insurance companies, mutual funds, trust funds and pension funds that can boost the market," Buenaventura said. According to Buenaventura, the Philippines’ savings rate was one of the lowest in the region and developing the capital market would help keep domestic savings on shore. "Banks will be compelled to revolutionize their business by offering more diverse financial products and services as they compete for public savings," Buenaventura pointed out. At present, Buenaventura said about 98 percent of domestic credit was being sourced from banks while other countries favor tapping their capital markets. "This ratio makes the banking system vulnerable and the 1997 crisis has taught us the high price of over-reliance on interest income," he said. "Now our banks are saddled with the task of getting rid of their bad loans to maintain profitability and avoid insolvency." Buenaventura pointed out that capital markets provide a window of opportunity for banks to redefine their role from just basic lenders to distributors of various debt securities. Buenaventura also pointed out that government securities dominate the capital market and private corporate issues are minimal. "In contrast, our neighbors enjoy vibrant capital market with debt papers predominantly coming from private issuers," he said. Buenaventura said the government, particularly the BSP, had taken crucial steps to shore up market liquidity and develop the institutional investor base for a more active capital market. "To my mind, we are finally presented with an opportunity to change our erratic course to economic nirvana," Buenaventura said. "We have a history of frustrated attempts on that goal to guide us this time in acting strategically and collectively." Buenaventura said these steps should encourage investors to help along the effort. |
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