An Overview of Philippine Financial Market Presented by
An Overview of Philippine
Jhobeth C. De Guzman
Analyn G. EliangJudy Ann M. MagnoShannen M. SicanJunelyn O. SuaybaguioPresented to:
Mr.Rock Bryan B. MatiasAn Overview of Philippine Financial Market
Financial market is the institutions that operate transactions in different forms. It is the market in which buyer and seller are exchanging transactions. Financial market are also known as the heart of financial system by means of finding securities that is available, allocating an interest, persuading savings and allocate prices to make transactions of different parties. The term market is used for what can be exchanges, would facilitate in the trade in of securities in financial market. It is used to raise funds in different periods of time that it would possible to earn profit. In a market the seller and buyer comes on a common platform, where the buyer purchases goods or services from the seller in an exchange of money.Financial markets provide savers additional options beside that of simply holding their saving in the form of cash. They can, if they wish to buy securities with money. Similarly, by financial market borrowers can finance their investment plans even though they may not have previously accumulated funds to draw upon. They can offer securities to obtain the funds they need.
Financial markets are the institutions and the systems that facilitate transactions in all type of a financial claim. There are two basic classifications of financial markets it can be primary or secondary markets or money market and capital markets we also have other classifications of financial markets.
Financial market has many classification and different kinds in different countries but for this research the only focus is the financial market in the Philippines. The Philippines has a following financial market; Stock Market, Consumer Credit Market, Bond Market, Cash or Spot Market, Money Market, Futures Market. Capital Market, and Over the counter market.
This research is to give you an overview of Philippine Financial Market. The objective of this research is to educate and increase the knowledge and awareness on some questions that can answer your curiosity and interest about financial markets. There are several financial markets executing here in the Philippines. These financial markets are not literally a place but a forum that the lenders can lend money and borrowers that can borrow money. These securities are issued by different sectors in the country it can be the corporation, government, businesses and other entities that trade securities. This is also for the corporations that can issue some financial instruments like bonds and stocks to its investors. Financial market is important because it serves as an intermediary for surplus and deficit units.
There are two categories in financial markets; these are primary markets and secondary markets. A primary market is where the new issues of financial instruments are sold for the first time to the public. And once these financial instruments are sold, it can be resold again to the secondary markets. There is a secondary market established in the Philippines which is the Philippines Stock Exchange, Inc. For instance, you have decided to buy shares from the San Miguel Corporation, however, you can no longer avail it directly from the existing company because everything have been probably sold already. In that case, you can avail it to the existing shareholder and buy a part of his share and that is considered as secondary market.
For the additional knowledge, whenever you like to wish to buy shares of stocks or bonds, you would need to have a stockbroker. They are the agents or middleman that can help you reach out with your prospective investors.
Statement of the Problem
The goals of any businesses are the following; first having an efficient funds that will help on their business that would be enough for the operations to continue on the long period, second is the maximization of their profit by that means the business are operating successfully, third is giving the customers satisfaction that they are needed, last is to maintain the image of the specific business.
To know the possible financial markets in the Philippines.
To identify the factors that are affecting the Philippine Financial Market Efficiency
To recognize the problem encountered by Philippine Financial Market.
To identify if there are increases or decreases in the Philippine Financial Market
Financial markets have been part of our daily lives. It is always relative to the prices of commodities and services running in the country. However, these following statements below are from the research studies conducted to give their further knowledge about the status of different financial markets in the country.
The financial market is the market where operations with securities take place. The structure of this can be sum of money currency market, interbank loans market and securities market. Consists of institutions where borrowers, lender, creditor supplier and demanders of securities can make transactions to each other whether it is direct or indirect. (Barinov & Khymyz, 2013)
President Duterte gives his assurance to the foreign investors that if they are going to invest their money in the Philippines it will surely return on profit that is expected by every investor. He is not the President who can allow the wrong doing of government officials in his authority like abusing their powers and corrupting the money of the Philippine government. Having this statement and assurance gives reasons to the investor to invest in different securities that is traded in Philippine financial market. It would be a great results after all every investments has a risk it can be a low or high risk but if you are going to take that risk it depends on the investors and in return it may a bad or that investment make you earn profit. (Romero, 2018)
Stock Market refers to the market where the exchange transactions deal with the equity securities. It is represent a form of ownership in a specific company or institutions. It is where an institution issues a share its either common stock or preferred stock, where you are able to buy shares. In this transactions involve institution who issues shares that is available and the analysts who has the capacity to review the information of a company who issues different kinds of shares. If the company or institution are having different good operations and investment that is the time that analyst would recommend them, buying stocks demand and increasing the price securities and shareholder`s wealth. All market follows the flow of Law of Demand and Supply because they believe in that case they would gain profit.
The stock has a two kinds; Preferred Stock and Common Stock. Preferred stock is a form of ownership acquire in that company by buying their shares while the common stock is a securities that you acquire. Common stock is also the basic form of stock in a corporate ownership. The different between the two are the preferred stock has a better privilege and right, the first one to give dividends is preferred stock because it has a higher form of ownership than the common stock. The preferred stockholders are promised a fixed periodic dividend that must be paid prior to payment of any dividends to common stockholders.
The investors benefit from the decrease if stock price in the market this year. If the investors wait for the stock price to go up then the little the shares they can buy, but before investing they should allocate the probable risk that it has and find an institution or company where to invest their money. The decrease of stock price is not as good as effect to the investors but rather it results in both sides, they purchased that stock or shares into a low prices and the increased in the investments rate in the Philippine stock market made by the foreign investors. (Liu, 2008)
On 2015 the rate of investment whether by local or foreign investors increases reaching 8000 level PSEi because of this event the PSE celebrated during that time joined by the President Aquino III being one of the happy person of getting this achievement. Philippine economy has a great impact about this factor it means that we are gaining the trust of every investor to invest in the securities that is traded in financial market. (Pardo, 2015)
Mentioned statement from the Assistant Head of PSE Market Education Department (Peñaflor, 2016) one of the reasons why PSE operates productively and efficiently is because of their well-trained employees for their own job. In every succeeding business in the world, there are employees behind of it who are working hard for the success of company they are working at.
The Philippine Stock Exchange Composite Index reaches above 9,000 dropping of stock markets. The latter mentioned statement concludes the reasons that: first, the purchasing power of Philippine peso (Php) is getting remarkably low as compared with the US dollar (USD), while on the other hand, the purchasing power of dollars over the exchanging value in peso increasing that will eventually result for the drop of value in peso. Wherein yearly, the peso rate is decreasing at over 4.5% versus the value of US dollars at 6.8%. Secondly, the instability of Philippine Inflation Rate in terms of the price of commodities and services. Regarding with the rate of inflation, Bangko Sentral ng Pilipinas target range is in doubt about rising of inflation that may result for the consumers to minimize spending. The peso is merely one of the reasons concluded for inflation in the country. Lastly, circa 2018, most of individuals have inadequate knowledge about the ongoing new tax reform of the Philippines that causes suffering to each individuals, therefore the government should have further explanations and education to the people involve. However, there are other reasons needed to be concluded and consider about the dropping or decreasing of stock market in the Philippine but these three statements above are the major reasons for this case. (Mangun, 2018)
The Monetary Board, Securities and Exchange Commission, Philippine Stock Exchange are willing changes and new ways to increase the number of investors and to expand and make the stocks be available to the masses. That have seen liberalize rules but still need propose new products or solutions (Francisco, 2018)
Consumer credit market it is a debt by purchasing of a good or even services of a person.It involves transactions that is related to any loan that is granted to the household who are aspiring to buy properties, car`s, gadgets, appliances, obtain educational loans for educational purposes for themselves or their loved ones or any other similar needs. The borrower is the consumers who obtain that loan. Consumer credit allows consumers like household, family, or personal uses to get an advance loan and spend the money on what they need. Consumer credit has a two broad categories; non-installment loan and installment loan. The non-installment loans are the single-payment loans made by financial institutions, service credit extended by doctors, hospitals, and utility company and retail store charge accounts. The installment loans are the personal loans and credit card purchases, home repair and modernization loans, automobile loans, loans for other consumer goods and any other loan that is granted for installment basis.
Consumer credit loan can be in a short-term or in long-term depend on what are obtaining to loan and what are the policies in a institutions or company you acquire that loan. If the loans is for short term it classify as a money market. If the loans are in long term it can be classify as a capital market.
Institutes who are offering different kinds of loans are pawnshops, SSS pension, lending companies, and other institutions. Pawnshops belong to this market because they grant loans to any people who pawn their jewelry, gadgets and any other items, who accept that thing for a security loan. It is in short term because the pawned item is taken by the pawnshop within one year and then resold for an auction that item they do that transaction on a yearly basis.
The interest rates of credit card in the Philippines today amongst the top in the country, in effect, the people who are skilful in borrowing of money are carrying a meaningful portion of the prize on the bad loans since, giving a deficiency of credit data that would be able to identify the kind of borrowers, having a high interest can tax on all credit card loan. (Tan, 2008)
Found at that banks lessen overdraft credit limits but when state laws prohibit payday loans. There is however, amounting evidence of substantial price dispersion in consumer credit, conditional on product and consumer risk characteristics. These patterns are consistent with lenders enjoying market power due to search and switch costs. Whether this leads to over or under supply on net remains to be identified, and presumably depends on demand elasticity and more primitive parameters. (Meltzer and Morgan, 2012)
Credit consumer demand here in the Philippines stay powerful, reinforced by President Rodrigo Duterte’s thrust to maintain the economic development. Credit home Philippines hoping to strike it target of 500,000 customer this year and duple its customer basis to 1,000,000 in the year of 2017. (Witschard, 2017)
Bond market is also a financial market it is considered as a capital market that provides financing in a long period of time. The participants for these transactions can issue new debts or usually known as the primary market or they buy and sell securities called as a secondary market in terms of bonds. It is generally classified into treasury notes, municipal bond market, corporate bond market, notes, bill and so on. The primary goal of bond market is to obtain long term funds in a public and private expenditure. Bond market with bank loans are part of credit market with other main component. Bond is not assured be collateral in a credit transactions although it can be but it can be sold in relatively small amount of denominations. A small number of bonds are listed on different exchanges. Bonds are more frequently traded rather than loans, although not as often as equity. Bond market also known as the debt market it is contrary to stock or commodities trading. The issuer includes both local and multinational, banks and even the government as an issuing entity. The purchaser is the group that buys the debt instruments composing the individual investor who invest in bond market. The underwriters perform the role of middlemen and do crucial activities such as preparing legal documents that is needed in a transactions, prospectus and collaterals to simplify transactions.
Recently, it is victorious to acknowledge that the Philippine government had successfully sold ¥ 154.2 billion worth of Japanese Samurai Bonds that is approximately $1.39 billion in US dollar value divided into three different tenors. (Department of Finance (DOF), 2018) The largest or the bulk part amounted ¥ 107.2 billion allotted to the form of three-year bonds that has been sold to the 0.38 % of the coupon rate. This rate took 25 basis points which is higher than the benchmark rate of the same securities. While another ¥ 6.2 billion was awarded to coupon rate of 0.54% for five-year yen dominated debt papers. This value took 35 basis points higher than the benchmark rate. And the last tenor is sold to a ten-year tranche that is amounted to 40.8 billion yen for 0.99% of the coupon rate, with 60-basis points spread in against benchmark. Overall, the transaction produced a weighted average of 34.7 basis points over the benchmark. This took the government issued a higher volume at a tighter pricing than other countries such as Indonesia with 100 billion yen and Mexico with ¥ 135 billion.
The bottom line of this event is that it was the first time after 20 years that the government had finally issued samurai bonds on a stand-alone basis. This successful return expected from the government to the samurai bond market will be the latest proof for their deepening investor confidence in the Philippine economy under the term of Duterte’s presidency. (Dominguez, DOF Finance Secretary, 2018)
As for the National Treasurer, this success will be counted as a back-to-back success of the Philippine government with the foreign debt markets this year. This event is going to be a trailblazing year for the Philippines in the international capital markets. On March 2018, the Philippine government issued the debut panda bond to the tremendous and prominent investor endorsement. And together with the today’s samurai offering, the Philippines will continue to expand and diversify the market access. (De Leon, 2018)
Spot market is the buying and selling is done “on the spot” for an immediate delivery and payment in that case they make transactions. The spot market is an opposite of the futures market and forward market. The two are contrast because in futures market the delivery is due at a later date. In a spot market the settlement is made within the working days like one or two days to one week, depending on the place where the transactions between two parties are involved that is classified as a spot market. In spot market trade are made up with spot prices, that are served as the current price in the market place which the assets such as commodity, security or currency can be bought or sold for immediate delivery.
The transition plan for the creation of an independent market operator (IMO) has been approved by the Philippine Electricity Market Board of Directors (PEM Board), with DOE Secretary Alfonso Cusi as the chairman. This transition will result that the IMO is going to take over the management and operation of the Wholesale Electricity Spot Market (WESM) from the management of the Philippine Electricity Market Corporation (PEMC).
The flow of the system was, IMO was incorporated as a non-profiting company that is independent to the government and industry participants. However, PEMC remained to be the governing body of the spot market with the board of directors which is still composed of participant representatives and independent members.
The DOE secretary had emphasized the importance of the implementation of IMO transition in accordance with the flow and system of this event that it has been long overdue; it has been delayed for a decade already. The time has already come to usher in its independence that was provided by the law (Cusi, 2018)
The chairman of PEMC believed that the occasion is auspicious that PEMC and the IEMOP have undertaken to further the development of the electricity market and to eventually fulfill the legal mandate for IMO transition. (Aboboto, 2018)
For over 12 years, PEMC has been operated the WESM. However, pertaining to the WESM Rules, the market operator should be an independent entity after a year of operation.
Money market is a financial market that has a short-term maturity is traded where it is issued by the companies with high standing. By means of buying and selling securities with short-term maturities of one year period or less such as treasury bills, certificate of deposits, and commercial papers that is why it become a financial market component. Money markets are also distinct from other financial markets because they act as a wholesale markets and having the large transactions that is involved. The function of this is to provide relative income that is stable and has a low risk and high marketability.
Money market can be short term lending and borrowing of marketable and non-marketable securities it also includes the significant interbank market that has interest stated or if not the annual interest would use. There are three interbank markets; the first one is the rate which is set by the central bank of the Philippines it can be bank rate, discount rate, and repo rate. The second which does not have a rate but there are exceptions. The third is the other one who is competitive among one another reserves to avoid the possible borrowings from the central bank.
The money market is the center transactions in monetary assets. Central bank is interested in money market other than the financial markets like stock market and capital market that is opposite to the periods of money market has because it covers in long terms. Money market has the following functions; the first is it allocate savings funds in an investment therefore bring a reasonable allocation of resources. If it allocates effectively the money properly then it would increase profit in short period. The second functions, it persuades the investor in saving and investment by promoting liquidity and giving assurance for safety of the financial assets. The third is provides elasticity in the flow of funds. It ensures the flow of funds from one sector to another and promotes stability in their institutions, firms, and companies.
It is an exchange to short-term fund, as the designation exchange signify, a market on money is bought and complete. When accelerate is increase of fund through the commercial operation business for the buying of inventories, from banks to finance improvised that provide disappearance and from government the intermediary the distance through this income/profit and expenses. (Noko, 2011)
Observed that money market instrument such as treasury bills, commercial papers, banker acceptance, certificates of deposit are very liquid form and precautionary extraordinarily safe securities. Most money market instruments are traded in high denominations. This limits the way of individual investors. (Mohammad 2014)
Futures market or futures exchange is where financial products are bought and sold for delivery at some future agreed date with a fixed price at the time of the deal of transactions to be made.It is exactly opposite to spot market. It is an agreement to transact in a future time to exchange the transaction that is agreed upon. It is for more than simply agricultural based contracts, and now involved buying, selling, and hedging of the financial products and the futures value of interest rates. Unlike other which are issuing securities in future market it can be created as long as it has open interest to increase. The sized of futures market is larger than the commodity markets and a key part of a financial system which is increase when stock market outlook is unpredictable. There is an ever-increasing range of future contracts to choose from. Index futures are becoming increasingly popular with traders. The use high levels of leverage to allow traders to exploit movements in an index including out of hour. Other futures markets cover government bond, large stocks and currencies. Be aware, however, that futures are riskier than trading stocks and bonds. Some futures contracts require high levels of leverage, which means that sudden changes in price in the underlying market could cost you a lot of money. Also future contracts bring with them the obligation to buy assets when they expire.
Futures market has two primary purposes; the first is price discovery, it provides market place where the buyer and seller from different countries would make transactions in a determinable price. The second purpose is to transfer price risk, it establish prices for future delivery of a product or services that are given to the buyers and sellers of commodities. Hedging is called to this price risk transfer.
If market participants anticipate an increase in the price of an underlying asset in the future, they could potentially gain by purchasing the asset in a futures contract and selling it later at a higher price on the spot market of profiting from favorable price difference through cash settlement. However, they could also lose if an assets price is eventually lower than the purchase price specified in the futures contract. Conversely, if the price of underlying asset is expected to all, some sell the asset in a futures contract and buy it back later at a lower price on the spot.
There are two participants in futures market; the first one is speculators who prove anticipation of a price change. Speculator is the buyer takes the risk of any market in anything happens of a price change. The second is the hedging, hedgers who is employ futures to lessen the risk from the results of price changes. Hedging is similar also to insurances that have a function in protecting the risk against unforeseen events.
Futures market is usually traded in organized markets. Futures trades can be a placed as a markets order by giving instructions to the floor brokers to transact in a best price that is available or limit orders by instructing floor broker to transact on a specified prices that is given. In a futures holder takes long positions in the futures contract or order maybe a sale of the futures contract in which the futures holder takes a short position in a futures contract.
Futures markets were created to allow these contracts to change hands. Most futures traders today do not intend to actually take delivery of an asset outside the commodities markets. Futures can be traded based on the prices of stock market indexes, currencies or blue chip stock. Most buyers and sellers trade commodities on the futures market because many commodity producers, especially those of traditional commodities like grain, bear the risk of potentially negative price changes when their products are finally ready for the market.
They distinguished that the limit value on drop exchange interchange on 2008 head to considerable margins calls benefit by lift on them situation in everyday ground, hedgers make historically expect on doing principal or profession loan to produce margin calls, still exchange provision up to 2008 structural these liquidity cause of the breaking period on some condition 10 time their differential limit on loan. (McKenzie and Kunda, 2009)
Capital market is for long term securities, it can be notes, bonds, mortgages, leases or equity securities. It is composed of stock market for equity or stock securities, bond markets for debt securities, mortgage market for mortgages, foreign exchange markets, derivatives markets securities, lease market, direct loan market and any other financial market that can be classify as a capital market.
Capital market has either primary or secondary market. Primary market is sold to the investors who are obtaining new stocks or bonds that issues to them by a mechanism called underwriting. The governments are the one who is looking to raise long term funds on primary capital markets. Other than bonds and stocks it also includes the hedge funds, pension funds, and sovereign wealth funds. The secondary market is where the securities existing are sold and purchase among the dealers or investors that is usually for an exchange over the counter or anything. In that case it could increase the investors approval in primary markets, they are able to rapidly cash out the investment if it has a need to arises.
The capital market composed of user of funds and suppliers. Users of funds include non-financial companies and governments financing infrastructures investment, and operating expenses. Suppliers of funds includes households institutions like life insurance companies and non-financial companies that has the functions in generating cash beyond the investment that is needed. The functions of capital market is to improve efficiency of transactions by that the individual entity doesn`t require to do some research and analysis, complete funds transfer and create legal agreements.
They have a greater component to study that can be focus on the Asean Region it may be Philippines, Indonesia, Malaysia that they provided the evidence in the Asean stock markets that it can show the integration, but supposed to be it is not completed, it provided the important benefits, but it is limited only in the long run. They only focuses the study of the liberalization that they have contributed to the integration in the Asean, they use the period of 1986-97 in the daily data in the currency in order to prevent the problem in the crisis period. (Lim, 2009)
It is also known the major trading partners is the US, and the other countries who are depend on much was be done to have a relationship among US and the Asian Countries because if the US got a problem the other country will affected.(Ismail and Rashman, 2009), (Fung and Tam 2010)
The Asean capital market integration is giving opportunity to examine its progress in term of the implementation plan. In the paper of (Yabasa, 2012) they have a similarity aim, that can study the progress of the market integration in East African Community before noticeable actions were be taken to develop their domestic capital markets.
In order to answer the research objective, we use qualitative method by collecting the data that we gathered from different sources like books, different webpage, articles, and even news. The goals of this research is to gain knowledge about the differences of the Philippine financial market that is the being discussed on this research what would be the example of this securities that can transact in the market between the suppliers and demanders of funds or securities. Using qualitative method will provides understanding of problems that happen in each financial market, gives meaning, characteristics, giving reasons for a particular case, opinions and help to develop an idea. We also have literature review that is related to the topic for having better clarifications; it also includes current knowledge or every knowledge that is given by the people in this topic.
Table 1: Stock Exchange Top 10 companies by market capitalization as of 2015 in the Philippine.Company Marker Capitalization(Php)
1.Manulife Financial Corporation 1,560,329,602,128
2.Sun Life Financial Inc. 867,890, 953,040
3.Sm Investments Corporation 742,712,400,625
5.Ayala Land Inc. 593,617,387,232
6.JG Summit Holdings 530,050,282,618
7.Ayala Corporation 496,168,357,752
9.Bank of the Philippine Islands 404,303,401,439
10.BDO Unibank Inc. 402,848,474
The table shows according to the Philippine Stock Exchange Index, it is top 10 companies that composed of highest market capitalization in our country. The different performance of this companies is measured by the PSE then allocate it to the highest and to the lowest amount but for this table it is the list of companies with the highest market capitalization.
The Efficient Market Hypothesis of 1970 explain the difficulty or forecast stock returns the results for that is the price market movement. The Philippine Stock Market is weak from efficiency by using the stock price movements the process of AR with replace residual, it supports the statistical evidence that support the hypothesis the Philippines. It could affect shares prices and large price movements from every study that is conducted fairly rapid by the market in terms of different information, but in cases of political and economic shocks .Other than this information about fundamentals appear are the reasons for caused of stock price movements.
The Philippine Stock Exchange (PSE) considered as the oldest in the Southeast Asia doing operations since the establishment that is dated August 8, 1827 by merging the two stock markets namely, Manila Stock Exchange and Makati Stock Exchange. The PSE is the main index composed of 30 listed companies and six-subsectors namely the following: Financial, Holding firms, Services, Property, Industrial and Mining and Oil indices. The Philippines has been recognized as one of the countries that has a strong potential in the economy in the world by 2050 only as prediction by the Hong Kong and Shanghai Banking Corporation System (HSBC), that prediction become a great results for the Philippines confidence on the economy conditions of the country all over the world that Philippine considered to be one of top 16 countries. The possible prediction Philippine Stock Exchange Index is the standard primary interest. Under the Philippine Stock Exchange, the stock price movement over the longer term meaning for two to ten years or more is one of the problems that are encounter by the PSE. The relationship between external influence and capital flow among investment choices cannot affect stock price movement but it will reflect to the growth in the economy of the Philippines but this statement in only the believed of the investors. In the middle year of 2013 from 7.9% moved to 5.9% in 2014 that was the rate movement of stock price during that years. In 2015 it become 5% only, that means it was the proof that the stock market are not affecting the economic fundamentals because of external influence like the Philippine politics, US interest rate policy, and China’s self-asserting actions in the Philippines, that means the stock price movement did not affect any stock price movement in terms of economic fundamentals related.
Key note have faith, that rather than the debt crisis get worse over all. There are some countries issued together with the particular team of the borrowers. The perspective of key note, is that the problem is getting worse, the other problem can affect the industry, and the trading fair of office take the lawful conduct contrary to the big banks, stand out narrow loan charges. Over indebtedness is the major problem. As more people bring more than the levels of debt, and determined that there are plenty who has increasing level of loan are able to maintain their payment. The result of debt is getting worse because of its power in time of unsteadiness of people, the one who lessen their consumption and opposed to danger. When the result circulated, the growth of the economy will become slowly and the number of unemployment will increase. Building societies have a smaller but had a healthy share in the credit market, while the merchant has a different amount of share, and grow their credit offerings outsource to the institution as of the main loan cards.
In most cases, the problems depend with the user and not the card. The consumers take in all kinds of problems because of the consumption of the card was not right. The problem is raised because of the freedom of putting price, and the economist disfavor takes place. In other side to the opinion of school and they believed that aside from securing correct data to the client, the status should kept out in the process of credit amount, and left it to the market forces. Other resistance is to tell what the set rate is and it is quite interesting. In additional it appeals with the righteous price of proof, aside from ceiling is set spontaneously to be a floor, whether it is both the exact amount of the number of lenders charge. Infinite, delays and risk is also include when the law or the board of administrative try to charge the rates. The people who borrowed in the market are the consumer that is not in a financial position to get beyond the competitive tradesmen. They have not enough knowledge and possible to judge or form the significance of the currently report to provide about the rate and period of credit.
The retail banking here in the Philippines are increasing, with customer loans. For only 10% of all bank, and lend in a lower than 5% GDP. In this case they used of the nature of the economy make on powerful demand for customer loan, with individual expenses making 77% up of GDP. The institution has lately centre much in retail lending , particular a not secured borrowing of money ,where extension of loan at a lower profit earner share effect in the non-performing ratio of a loan of about 20%. Talking about the overall lack of information of the credit consumer and lack of credit civilization. The authorities of the Philippines have strict to their policy on the lending of the credit card while going forward for the foundation of bureau of credit even though the lending of consumer here in the Philippines in an early time, as we know it is very great that the institution control has it is quick growth with the credit sound judgments and lessen the high ratio of their book loan of the corporate.
Marketplace or facilities involves bond issuance and trading exchange. An exchange is an organized marketplace where the buyer and sellers were bind together, and it executes trade of securities or commodities. The no buying and selling of security can be made in an exchange unless it is registered in the accordance of the section 33 `Registry of Exchanges of the SRC and the rules and regulations advised by the SEC.
The problem that bond market is the issuance of bond means taking huge responsibilities. According to Asian Development Bank(ADB) Team ASEAN Volume 1: the issuer of the financial instrument shall be subjected to default under the bonds and the trust Indenture or Trust agreement in case any of the following defined events (exhibit the examples of items. Each an “Event of Default” shall occur and is continuing;
Winding up proceedings
Representation warranty default
Breach of obligations
Writ and similar process
Change of control default
In case that all of these have been occurred of any of those defaults you may face the consequences of defaults. If anyone or more of the events of default may occur and still be continuing to happen after the lapse of the period has been given to the issuer with in which to resolve such event of default under the Trust Indenture or Trust Agreement, or upon the occurrence of such event of default for which no cure is provided, the trustee, upon the written direction of the Majority Bondholders, by notice in writing delivered to the issuer and the trustee, in its discretion in case of a non-payment or insolvency default, may declare the principal of the bonds then outstanding, together with all interest accrued and unpaid thereon and all amounts due under, to be due and not payable not later than for instances five business days the period provided by the Trust Agreement and in these terms and conditions from the receipt of the declaration of default with copy to the paying agent, who shall then prepare a payment report in accordance with the registry and paying agency agreement there upon the issuer shall pay.
The Philippine bond market was the fastest growing among debt market in the Emerging Fast Asia region in the fourth quarter of 2017, showing positive economic growth for the region and enlarged prospects of higher inflation. In its new bond monitor, the multilateral bank told the Philippines local currency, the bond market turn at faster pace of 12.5% year on year in the fourth quarter of 2017, with the sum of outstanding LCY bonds at 5.75 trillion versus 4.869 trillion in the fourth quarter of 2016.
Government produce bonds grew at 12% year on year to P4.456 trillion in the past quarter of 2017 from P3.978 trillion in the moderate period of 2016. This includes the treasury bills, treasury bonds, and bonds that produced by government agencies, entities and corporations for which disbursement is guaranteed by the government. These include bonds issued by the power sector assets and liabilities management corporations and the national food authority, among others. The main reason of growth during the quarter was the issuance of P2.554 billion retail treasury bonds by the government in December.
The objectives of the spot market are to establish an efficient competitive, reliable and transparent market for electricity where, a level playing field exist among WESM participants within the spot market, those third parties have granted access to the power system in accordance with the act, the prices are governed as far as practicable by commercial and market forces and it most of all it encourage efficiency.
Five years ago, when the Philippines woke up from its bureaucratic slumber the Energy Regulatory Commission has finally declared. Here are the problems that encounter by Wholesale Spot Market:
Volatility of prices in the spot market is often getting uncontrollable
Change in law that effect existing contracts.
Generator/plant/outrages maintenance that has to be done always when a certain power plant of a certain power supplier is on shutdown especially here in Luzon that makes rotating blackout’s occur
The often foreign exchange fluctuations contribute to increase in power rates.
Fuel cost: Oil price increases often that results to higher power cost thus making the power bill higher.
Transmission Facility Maintenance always happens when the transmission facility of the system operator is under maintenance.
There is an often political risk/pressure from certain public office especially during the election period contributes to the inefficiency of any electric cooperative in the Philippines.
The lower collection efficiency percentage that results to zero discounts for Batellec II`s member consumers. Thus, it causes delays to financial settlement to the WESM.
The often cross of ownership of a certain business entity between generation facility and distribution utility results to conflict of interest.
Anti-competitive behavior of power supplier transpired by holding the electricity supply often results to high electricity rates.
According to the market model, market operator should publish and maintain a market network model which will be used for the purpose of pricing and settlement and central scheduling and dispatch. Market trading node should be defined for each node in the market network model that lies at the boundary between a network operated by the system operator and any apparatus equipment or network used to convey, generate or control the conveyance of energy and operated by a person aside from the system operator. The market operator should make consultation with WESM Participants, continuously review the procedures for determining the market network model, market trading nodes and customer pricing zones and to the extent the market operator considers it to be reasonably necessary to promote the WESM objectives, the market operator may recommend changes to these procedures in accordance with the rule change process.
Definitely, yes according to the report from business inquirer about meralco announced a decreased in overall electricity rates for May 2018 that is amounting to Php.0.5436 per kwh for a typical household. The lower rate is mainly due to the Php.0.4212 per kwh decrease in the generation charge. The adjustment for this month brings the overall rate to Php.10,041 per equivalent to decrease of around P109 in the bill of a residential customer consuming 200 kwh. Lower WESM charges bring down the generation charge from Php.5.4735 per kwh in April, the generation charges for this month will be Php.5.0523 per kwh. Chargers from the Wholesale Electricity Spot Market decreased by Php.1.0139 per kwh, despite its higher demand for the power in the Luzon grid, because of this various power plants are previously on scheduled maintenance shutdown going back online. The share of WESM purchases to Meralco`s total requirement for this month was 22%. The cost of power from Independent Power Producers (IPPs) also went down by Php.0.5920 per kwh due to Quezon power`s return to normal operations from its scheduled maintenance. The improvement in average plant dispatch is more than due to higher Malampaya natural gas prices resulting from the quarterly reprising that reflect recent movement of crude oil prices in the world market. IPPs provided 45% of meralco`s total energy requirement. Meanwhile, purchases from Power Supply Agreements(PSAs) increased P.02096 per kwh due to scheduled maintenance outage of Pagbilao Unit 1 and Ilijan Unit 1 and the quarterly reprising of Malampaya for natural gas. The share of PSA purchases to meralco`s total requirement for this month was 33%.
If the interest rates go higher, there is a probability that investor might sell at a discount. Everything that happens in the global market directly or indirectly affects. The Philippines and the manipulated tightening made in global interest rates will remain a challenge. There changes and uncertain reason the global and local landscapes now which market more challenging to identify the chance, but of course with good macroeconomic fundamentals our market has been very elastic over the past years and we`re optimistic that the markets will win the challenges. Market is nominally regulated having the most great participant as professional investors. This market has become more approachable to the investing public indirectly, by the market accounts and money. Market funds give by financial services firms. These firms invest the money available in their client accounts in money market that provide additional investment restore to their client money when the securities give higher yields than the cash in bank and have comparatively low risk of default, particular those issued by the government. By the terms of investing that take a low single digit restore, when contrast the stocks or corporate debt. produce, the risk to filled is normally fully low.
Philippines money market is a total of different financial organizations or negotiator, who wants loan security, is the best resource of commission in liquid assets. It contains irregular market in unstructured similar to capital markets gives less expected to investors who invest in the form of different of products. Knowing this thing we can determine the secure place to put money in suitable increase liquidity of securities. This actual crisis whether the investor has enough knowledge about this kind of transaction for them to avoid possible losses.Money markets in the financial crisis and are the subject of durable report coverage. Even if it was blast signify a shortage of perception of money markets into broad and particularly on a deficiency of perception as to cause the financial risk unfolded as it did in these exchange. If the money market principal earnings does not includes operating expenditure or principal disappearance. Its generally happen when the cause charges drop to subordinate level or funds have consumption movement to generate investment risk or if not risk exempt equipment. Market want to guide the public and increase their awareness of the products available in the money market and at the same time prevent them from falling into instruments scams that will deplete their savings. They want is to promote savings and invest it is in instruments to cover their future requirements.
When futures markets are subject to individual influences than are cash market, there is a greater concentration of positions in cash market. The hedger creates a situation in which any modify on the market money of merchandise, security, otherwise currency is exactly loosen by a profit or absence in agreement.
Price prevailing as the contract maturity will be the settlement price, whether it goes higher or lower since the tine the futures contract was entered into. Using future as a hedge to reduce risk, stand the various dealers and speculations, who buy or sell the paper contracts to such items according to their view of probable price movements.
Futures market in the Philippines can be used by many kinds of financial players, including investors and speculations as well as companies that actually want to take physically delivery of commodity of supply it. It can be a good source of commodity price information is because pre changes in merchandise’s value degree not changes on agreement term.
There are many factors that affecting in the Philippine capital market but there are five factors that are very important in the Capital market, the systematic risks these factors are largely dependent on the capital market system based on the structure and process. The global capital markets organizations established regulation to have a security in trading from different investors or others that is included. In efficiency term it has the capability to operate the quantity that is needed to exchange on possible time or the earliest time to make it without any mistake to happen. Having reliable systems are always needed to acquire by every institutions for them to operate all the time and avoid every failures to have a good transactions. Failures on transactions on time make the investors think that you are not capable of every related thing to your business.
The problems has encounter by the Philippines capital market is has a low ranks in development in terms in ability to develop financial mechanisms. The Philippines has ranked 48th among 52nd countries. It allows companies to secure funds from debt issuances. One of surprising challenge for the capital market is the health of the financial system. With the interest rates low and high level of liquidity. In that case the capital market has a relatively poorly engaged and has not reached the same popularity found in other markets. Only 1% of the Philippines population has been invested in shares.
The Philippine was one of the more developing countries, it remained unfulfilled until the present time. The financial sectors of the Philippine since 1980 background for examining the development of the capital markets. Here are some problems, first with the increased urbanization and industrialization of rural areas, few people will be want to rely on informal community arrangement to support their retirement placing the greater demands on the formal system. Last is the size of the retirement population relative to the size of the workforce is projected to size significantly.
One of the negative aspects of public sector controlled the pensions funds is the high profitability of the politically motivated inefficient investment. But there are the allegations that the investment of the public sector pensions asset in the Philippine. Fallen under political influence like for example; the former heads of the SSS and GSIS admitted that former President, Estrada benefited from transaction which is the gaming firm there are suspicious that he also has profit from other deals such as the1999 merger of PCI Bank. The equitable are the countries tenth largest lender was able to acquire 72%, the third largest bank because the SSS and GSIS each contributed 7.5 billion to the 31.9 billion deal. It was truly questionable in the transaction was financed with the pension and other. Retirement contribution of private and the state employee, but in fact the merged bank has run into one financial problem after another since the owner merge with Estrada was exposed during the former president impeachment trial.
The Philippines capital market are growing and evolving but there are many opportunities both the equity and debt spaces that we should consider to further grow the sector. As the country’s bank it has been giving an expert advice and also it can help to continue the reform of the capital markets by encouraging the participation of the investors, providing alternative sources of funds to growing companies and to promote the financial inclusion. The capital market under represents the overall Philippines economy with only about 300 companies listed on the Philippine stock exchange and over 80% of the total volume in the Philippines dealing and exchange corporation
The function of financial market is very important in our daily lives especially to the individuals, in the businesses and also in the government. Financial institutions and the markets work as a team to create a flow of funds. The institutes give permissions for those that have extra funds to deposit their own money, while those that are insufficient of funds are given the opportunity to borrow. Financial markets manage funds among borrowers and instrument with the market as the primary and secondary market. Both of these markets help companies to create needed funds. Without the financial market the savers would no other choice but to gather their extra money and borrowers would be impossible to realize any investment plans otherwise those they could finance by themselves. In this case the purpose of the financial market is the lender can lend money and the borrowers that can borrow money. Financial markets they are the one who can offer a security obtain the funds that they are needed.
BIBLIOGRAPHY (n.d.). Retrieved from Asian Bond Lines: www.asianbondlines.adb.org
(n.d.). Retrieved from Bangko Sentral ng Pilipinas: www.bsp.gov.ph
(n.d.). Retrieved from Bureau of the Treasury: www.reasury.gov.ph
(n.d.). Retrieved from https://www.tandfonline.com/doi/full/10.1080/13504850500397437?scroll=top;needAccess=true
(n.d.). Retrieved from https://www.managementstudyguide.com/financial-market.htm
(n.d.). Retrieved from Money Market Association: www.mart.com.ph
(n.d.). Retrieved from https://tradingeconomics.com/philippines/stock-market
(n.d.). Retrieved from https://businessmirror.com.ph/stock-market-003-why-the-pse/
(n.d.). Retrieved from https://en.m.wikipedia.org/wiki/Bond_market
(n.d.). Retrieved from https://www.investopedia.com/terms/c/capitalmarkets.asp
(n.d.). Retrieved from https://www.investopedia.com/terms/c/capitalmarkets.asp
(n.d.). Retrieved from https://m-economictimes-com.cdn.ampproject.org/v/s/m.economictimes.com/definition/capital-market/amp?amp_js_v=a2;amp_gsa=1;usqp=mq331AQECAFYAQ%3D%3D#referrer=https://www.google.com;amp_tf=From%20%251%24s
(n.d.). Retrieved from https://unilearning.uow.edu.au/report/2bv1.html
(n.d.). Retrieved from https://www.manilatimes.net/the-need-for-financial-derivatives/20330/
(n.d.). Retrieved from https://www-researchgate-
(n.d.). Retrieved from https://www.google.com.ph/search?q=features+of+money+market+pdf;o
(n.d.). Retrieved from https://www.google.com.ph/search=true;q=definition+of+futures+market;oq=;gs_
(n.d.). Retrieved from https://www.consumercredit.com/credit-problems
(n.d.). Retrieved from https://www.nationaldebtrelief.com/common-causes-credit-card-debt/
Abola, V. A. (1998). Commercial Banks and the T-bill Rate: “A Different Perspective”. Pasig City: CRC Foundation Inc.
Asian Development Bank. (1997). Retrieved from www.asdb.com.ph
Asian Deveopment Bank. (1997). Changes and Challenges. In Emerging Asia. Manila.
D.Peterson, K. (2000). Financial Institutions Market and Money. In Blackwell.Dy. (2017). Philippine Derivative Market. Retrieved from https://www.coursehero.com/file/27868983/131821931-Philippine-Derivative-Market-A-Studydocx/(Dy, 2017)https://www.thebalance.com/preferred-stock-definition-vs-common-stock-types-3305954
Dy, M. L. (2017). Capital Markets.
Inquirer, G. P. (2012).Krasivina L, N. (2005). International Exchange and Financial-Loan Affairs .Lopez, M. D. (2017). Capital Markets.
Mangun, J. (2016, December 28). Outside the Box.National Economic and Development Authority. (n.d.). Capital Market Background. Metro Manila.Padin, M. G. (2018, August 9). Philstar Global. Retrieved from https:/www.philstar.com/business/2018/08/09/1840814/philppines-raises-139-billion-samurai-bonds
Philippine Dealing Exchange . (n.d.). Retrieved from www.pdex.com.ph
Philippine Stock Exchange ; Cities Online. (n.d.). Retrieved from A Basic Guide to Investing in the Philippine Stock Market: http://www.pseacademy.com.ph/global/userfiles/PSE-COL%20 primer_HiRes1.pdf
Philippine Stock Exchange Market Education Department . (n.d.). Retrieved from http://www.pseacademy.com.ph/
R., A. (2006). “Efficiency of the Philippine Stock Market”. In Applied Economic Letters (pp. vol.13, pp.463-470).S.Flores, A. M. (2018, September 19). Manila Standard . Retrieved from http://www.manilastandard.net/business/power-technology/275901/pemc-readies-transfer-of-spot-market-operation.html
Securities and Exchange Commission. (n.d.). Retrieved from www.sec.gov.ph
Sy, W. (2018, April 23). Philippine Star. Retrieved from Why Philippine Stock Market is dropping: https://www.philstar.com/business/2018/04/23/1808406/
Teplova T, V. (2000). Financial Management: Managing Capital and Investments.
V., E. (n.d.). Financial Markets and It’s Securities. Complekt, Moscow.
V.D, M. (2001). Finance LEM. In K. Iliyasov.