Sale of more peso bonds under study

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 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 Corporation (PDEX), were studying taxation issues related to the debt sale. Foreign investors have said an existing 20 per cent withholding tax on local debt issues has made peso debt unattractive.

"The tax treatment will be based on tax treaties that we have with them [other countries]," Tan said. "This is being pursued by the PDEX with the Singapore trading exchange."

Asia enjoys heavy foreign fund inflows with investors banking on rapid growth this year. The Philippines has benefitted from these fund flows with the stock market soaring to its highest since early 2008 and the peso rising to its strongest in nearly two years. Last month, PDEX posted a record one-day trading volume of 53.75 billion pesos (Dh4.4bn), its highest in its five-year history as a debt exchange.