PDS sees fixed income market slowdown in first half, recovery in second half

 MANILA, Philippines - The Philippine Dealing System (PDS) is anticipating a slowdown in the volume of transactions in the fixed income market for the first half this year, but the market is expected to post a strong recovery in the second semester.

“There will be a slowdown in reaction to rising interest rates,” PDS Group president Vicente B. Castillo said adding that the challenge for the market is to provide windows for protective products, and the further integration of the regional markets.

The PDS Group is composed of the Philippine Dealing and Exchange Corp. (PDEx), Philippine Depository and Trust Corp. (PDTC), and the Philippine Securities and Settlement Corp. (PSSC).

PDEx, the country’s only fixed income exchange, is deemed a critical component of the Philippine capital markets.

Castillo believes that the markets will recover after the first semester, and take advantage of opportunities for growth.

“The second half of the year will see the return of the volumes,” he said. Last year, trading volumes hit record levels of P5.4 trillion or a little over a hundred percent higher than the P2.58 trillion in 2009.

In 2008, trading volumes amounted to P1.9 trillion from P437 billion in 2005. In terms of net earnings for the group, a conservative 12-to 14-percent growth is anticipated.

Castillo said improvements in asset class, further regional integration of the capital markets, and the continued recovery of the economies will boost earnings.

Last year, the PDS Group reported a net income of P130 million, more than three times the P37 million registered from the P37 million the year before. The company reported its first positive performance in 2009 after four consecutive years of losses.

Castillo said they hope to see a regional integration of the capital markets within six to 12 months.

Last month, the group signed a strategic agreement with Thomson Reuters to jointly deliver enhanced products and services to the members of the PDS Foreign Exchange (FX) and fixed income trading communities in the Philippines.

Thomson Reuters provides information on dollar-peso FX swap and FX Forward trading system for the BAP member banks. It is the premiere system for FX spot and forward trading of global currencies by Philippine banks. It also provides trading capabilities for interest rate swaps and forwards.

The PDS Group currently operates the dollar and peso FX spot trading system for member of the Bankers Association of the Philippines (BAP) through a system provided by a Nasdaq OMX and operates the dollar-peso payment versus payment (PVP) system – the Philippine FX settlement system, as well as the Philippine domestic dollar transfer system (PDDTS).