MANILA, April 25 - The Philippines is working on a mechanism to encourage foreign investors to buy more local currency bonds and plans to issue debt instruments such as dollar-to-peso warrants to raise capital market liquidity, the national treasurer said.
Asia's largest sovereign issuer of foreign debt was still interested in accessing the euro bond market and would pursue a euro debt issue when conditions become attractive, Roberto Tan also told a foreign exchange traders annual convention in Boracay island in central Philippines over the weekend.
"Hopefully, we will be issuing peso bonds to foreign markets," Tan said, adding the debt papers may eventually be listed on other markets such as the Singapore exchange.
Officials at the country's currency and debt exchange, Philippine Dealing and Exchange Corp , were studying taxation issues related to the debt sale. Foreign investors have said an existing 20 percent withholding tax on local debt issues has made Philippine peso debt unattractive.
"The way I look at it, the tax treatment will be based on tax treaties that we have with them ," Tan said. "This is being pursued by the PDS with the Singapore trading exchange."
Asia currently enjoys heavy foreign fund inflows with investors banking on rapid growth in the region this year.
The Philippines has benefitted from these fund flows with the stock market <.PSI> soaring to its highest since early 2008 and the peso
Last month, PDEX posted a record one-day trading volume of 53.75 billion pesos , its highest in its 5-year history as a debt exchange.
Tan said Manila was studying other debt instruments to encourage more placements in the local capital market.
"We are planning to undertake regular opening of the outstanding bonds to create benchmark bonds given liquidity of securities, and issue innovative debt instruments such as swaps, zeros , dollar-to-peso warrants and indexed bonds," he said.
Manila is also interested in pursuing an earlier plan to go back to the euro-currency debt market to diversify its debt profile. Its last euro debt issue was in 2002.
"We are now looking at accessing the euro market if conditions become conducive," Tan said.
