HSBC executive says PPP projects to spur corporate capital-raising

MANILA, Philippines - The Hongkong and Shanghai Banking Corp. (HSBC) expects capital-raising activities by private corporations to intensify starting this year due to their greater involvement in the government’s public-private partnership (PPP) projects.

The UK-based investment bank said it is looking at a 10-percent growth in lending in its Philippine operations this year.

Industry sources said the government is reportedly scheduled to hold a Middle East roadshow next month. The focus will be on Philippine infrastructure projects under the PPP as differentiated from the London roadshow that had tourism and tourism-related infrastructure.

HSBC senior vice president Roland Gregorio V. Veloso said they expect several PPP projects to be finalized this year, but these projects would actually get off the ground in 2012.

He explained that the terms of reference (TOR) had not been finalized despite the government having identified 10 to 11 PPP projects. More than 500 foreign entities have already expressed interest in the PPP projects but the matching of foreign investors, local investors and the projects have not yet materialized.

“It’s still like a public bidding process of the government,” the HSBC official said. “The interested parties will still have to agree on the TOR and make their bids.”

Most investment bankers expect that two to three PPP projects will “move faster,” especially the Legaspi and Bohol airports. “These have the greatest impact, the physical assets are in place like an existing airport that needs expansion or modernization.”

Meanwhile, HSBC estimated that its lending portfolio for the corporate sector likely expanded by up to 25 percent in 2010. “We are already forecasting another 10- to 15-percent lending growth this year,” Veloso said.

He, however, said the modest growth in lending seen for 2011 was due to the various options for raising capital, such as the equities and capital markets.

Overall, the banking industry is expecting lending growth of at least 10 percent in 2011 due to strong private consumption, owing in turn to the robust growth in the remittance market.

The Bangko Sentral ng Pilipinas (BSP) reported that total remittances from overseas Filipino as of November 2010 reached $17.068 billion. For the month of November 2010 alone, remittance inflows amounted to $1.612 billion or 10.5 percent higher than the same period in 2009.

HSBC chief executive officer for the Philippines Tony Cripps likewise revealed that they will be increasing activities in the equities market in terms of raising capital for their corporate clients. However, they would still rely on the regional office in Singapore in the absence of having their own specialists or “desks.”

They would still be involved in various capital-raising activities such as rights offer, private placements, convertibles and, of course, the PPP projects.

“2011 promises to bring big capital-raising activities especially the PPP projects,” the HSBC chief executive said.

Inflation, however, will still be the major concern for the Philippines, as consumer prices are expected to increase due to spikes in oil and oil-related activities.