Economic & Capital Markets Briefing

August 12, 2020

Philippine Capital Markets

Overview
I. Debt Capital Markets
A. Key Themes for 2H2020
B. Summary of DCM Issuances for 1H2020
C. Rate Environment
D. BSP Policy Actions
E. Offshore Bond Issuances and UST Yield Curve

II. Equity Capital Markets

A. Key Themes for 2H2020
B. PSEi Performance
C. Summary of ECM Issuances for 1H2020

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Debt Capital Markets
1H2020 Review and 2H2020 Outlook
Key Themes for 2H2020
Continued Low Interest
Rate Environment
• The BSP will continue to actively
apply monetary policy in
supporting economic growth
• This will serve as an opportunity
for fundraising at attractive rates
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Lowered Bank Reserve
Requirements and
Muted Inflation
• Lower RRR will provide a larger
liquidity base for the market
• Consumer prices continue to
ease YTD
Increased Interest in Offshore
Bond Issuances
• Private companies have shown a growing
interest in accessing offshore markets for
USD bond fundraising
• Offerings have been met by strong
demand (multiple times oversubscribed)
due to attractive rates and strong credit
ratings
Debt Capital Markets, 2015 to July 2020
PHP, Billions
1,200
1,074.5

1,000 +70% 3

800
663.4 629.9
23 827
600 43

437
370.6 241
400
254.8 -
122
158.5 28 260
200 124
100 77 179
54
14- 24
91 103 126 125 86 66
-
2015 2016 2017 2018 2019 Jan-Aug 2020
Corporate Bank Government Preferred shares

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DCM Issuances
Jan-July 2020

PHP 3.0B

4.6%

14.5% 22.8%
PHP 9.6B
PHP 15.0B

PHP 65.8 B
15.2%
Corporate
PHP 10.0B
Bond Issuances
22.8%

20.1%

PHP 15.0B

PHP 13.2B

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DCM Issuances
Jan-July 2020

PHP 49.2B
27.6% PHP 15.6B

8.7%

PHP 178.6 B 5.9%

PHP 10.5B
Bank 3.9%

Bond Issuances 3.8%

2.8%
2.6%
2.1%
42.6%

PHP 76.1B

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BSP Policy Rates, 1H2020

4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%
02/06/2020 03/19/2020 04/16/2020 06/25/2020
Overnight reverse repurchase rate Overnight lending rate Overnight deposit rate
Source: http://www.bsp.gov.ph/monetary/monetary.asp

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 5Y BVAL & Inflation Rates
3Q2019-1H2020

5.0% 4.67% 4.60%

4.48%
4.38%
4.5% 4.17% 4.26% 4.26%
4.12%
4.38%
4.06%
4.0% 4.28% 3.66%
3.87% 3.80% 3.31%
3.5% 3.82% 3.76% 3.65% 2.76%
3.72%
2.90%
3.0% 2.99% 2.50% 2.70%
2.60%
2.50% 2.50% 2.44% 2.45%
2.40%
2.5%
2.05%
2.44% 1.86%
2.0% 1.70% 2.20%
2.10%
1.5% 1.30%

0.90%
1.0% 0.80%

0.5%
0.0%
Jul'19 Aug'19 Sep'19 Oct'19 Nov'19 Dec'19 Jan'20 Feb'20 Mar'20 Apr'20 May'20 Jun'20 Jul'20

Sources: Bloomberg and Philippine Statistics Authority 1Y BVAL Yield 5Y BVAL Yield Headline inflation

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 PHP Yield Curve and Outlook
Jan-July 2020

6.0%
5.26%
5.13%
Jan-02-20
5.0%
4.47%
4.27%
4.06%
3.84% 3.95% Jul-30-20
4.0% 3.76%
3.88%
3.36% 3.42%
3.20% 3.53%
3.12% 3.68%
3.0% 3.33% YE2020
2.78%
2.64%
2.44%
2.32%
2.19% 2.53%
2.0% 2.04% 2.39%
1.81% 2.19%
1.94% 2.07%
1.61% 1.79%
1.29% 1.43%
1.56%
1.0% 1.26%
1.08%
0.94%

0.0%
1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 7 Yr 10 Yr 20 Yr 25 Yr
Sources: Bloomberg and Philippine Statistics Authority

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Offshore USD Issuances
Jan-July 2020

23.8%

USD 500.0M
7.3%

USD 6.8 B 17.6%

7.3% USD 1.2B
(PHP 340.8 B)
USD500.0M
Offshore
8.8%
Issuances
8.8%
USD 600.0M
8.8%
8.8%
USD 600.0M
8.8%

USD 600.0M
USD 600.0M
USD 600.0M

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 US Treasury Yield Curve, 1H2020
2.5% 2.33%
2.19%
Jan-02-20
2.0% 1.88%
1.79%
1.67%
1.53% 1.55% 1.54% 1.57% 1.56% 1.58% 1.59%
1.5%
1.20% Jul-30-20
0.98%
1.0%

0.55%
0.5% 0.40%
0.23%
0.10% 0.10% 0.09% 0.11% 0.11% 0.11% 0.14%

0.0%
1 Mo 2 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr
Source: US Treasury Website

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Equity Capital Markets
1H2020 Review and 2H2020 Outlook
Key Themes for 2H2020
Gradual easing of lockdown
restrictions to boost economic activity
• More businesses to reopen
• Consumption-driven recovery
• Lockdown measures to be applied in
more localized contexts as needed
while the economy reopens
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Further fiscal policy stimulus A few IPO and REIT issuances
will push through
• PHP1.3 trillion package Accelerated Recovery
and Investments Stimulus (ARISE) • Several IPO and REIT offerings
• PHP1.5 trillion COVID 19 Unemployment delayed due to challenging
Reduction and Economic Stimulus Bill (CURES) market conditions are slated to
• Corporate Recovery and Tax Incentives for
push through in 2H2020.
Enterprises (CREATE) bill – reduction of the
corporate income tax rate from 30 percent to
25 percent, provision a targeted fiscal
incentives system; and taxing the digital
economy.
 Philippine Stock Exchange Index
8500.00
2020 High (Jan 2)
7,742.53
8000.00
DOH Reports First Case of COVID19 in the Country
January 30 2020

7500.00
Sec. Dominguez Orders State Pension
Funds to Purchase More Shares
March 13, 2020
7000.00 First Novel Coronavirus
Metro Manila Eases to GCQ
Outbreak is Reported in Wuhan
June 1, 2020 July 30 Closing Price
December 31, 2019
5,928.45 (-24.14%)
6500.00
PH Economy Shrinks by 0.2%
Pres. Duterte Declares a State May 7, 2020
6000.00 of Public Health Emergency
March 8, 2020 Unemployment at All Time
High of 17.7%
5500.00 June 5, 2020
Luzon is Placed Under ECQ
March 17, 2020

5000.00
2020 Low (Mar 19)
+40%
4,623.42 (-40.29%)
4500.00

Source: S&P Capital IQ, CNN, Rappler

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2020 Equity Issuances

• Listing Date: June 15, 2020 • Listing Date: June 26, 2020
• Issue Price: PHP 1.00/share • Issue Price: PHP 10.10/share
• Last Closing Price: PHP 2.71/share • Last Closing Price: PHP 13.10/share
• Market Cap: PHP 20.6 Billion (+171% vs IPO) • Market Cap: PHP 1.3 Billion (+30% vs listing)

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 Emerging Asia Index Growth Rates Regional Comps P/E ratio (2019) P/E Ratio
(Aug 10, 2020)
YTD Growth (%) as of Aug. 10, 2020
PSEi (Philippines) 16.9x 15.5x
45.00%
Kuala Lumpur Composite Index 18.4x 20.3x
(Malaysia)
35.00%
SET Index (Thailand) 18.9x 18.9x
25.00% VN Index (Vietnam) 15.8x 14.1x
Jakarta Composite Index 19.8x 18.4x
15.00%
(Indonesia)

5.00%
-1.33%
-5.00%
-12.79%

-15.00%
-16.96%

-25.00% -18.41%

-23.85%
-35.00%

-45.00%

-55.00%
Dec-27-2019 Feb-10-2020 Mar-23-2020 May-05-2020 Jun-16-2020 Jul-28-2020

Philippines PSE Composite Index (^PSEI) - Index Value Kuala Lumpur Composite Index (^FBMKLCI) - Index Value SET Index (^SET) - Index Value
Vietnam VN-Index (^VNINDEX) - Index Value Jakarta Composite Index (^JKSE) - Index Value

Source: S&P Capital IQ, Bloomberg

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2020 Investment Banking Deals

PHP310,800,000,000 PHP5,000,000,000 PHP4,650,000,000 PHP15,000,000,000 PHP10,500,000,000

3-year Corporate Notes Facility 3-year 5- and 7-year 1.25-year
Retail Treasury Bonds Fixed Rate Bonds Fixed Rate Bonds Fixed Rate Bonds
with Bond Exchange
Co-Arranger Selling Agent Joint Lead Underwriter Joint Arranger
Joint Issue Manager Joint Bookrunner Selling Agent
Selling Agent Selling Agent

February 2020 February 2020 February 2020 March 2020 June 2020

100,000,000 PHP9,550,000,000 PHP13,190,000,000 USD500,000,000 PHP516,300,000,000

Mandatory Tender Offer Common Shares 2- and 5-year 3- and 5-year 5.5-year 5-year
for the Shares of Stock of
Listing By Way of Introduction Fixed Rate Bonds Fixed Rate Bonds `/
Senior Unsecured Fixed Retail Treasury Bonds
Pepsi-Cola Products Rate Notes with Bond Exchange
Philippines, Inc.
Financial Advisor Joint Issue Manager Joint Bookrunner
Joint Lead Underwriter Joint Lead Underwriter Joint Global Coordinator Joint Issue Manager
Financial Advisor Joint Bookrunner Selling Agent
July 2020
June 2020 June 2020 July 2020 July 2020 August 2020

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