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Market jitters over Omicron unlikely to hurt upcoming IPOs

By Keren Concepcion G. Valmonte, Reporter

MARKET JITTERS over the new coronavirus disease 2019 (COVID-19) variant are likely to be temporary, analysts said, noting that upcoming initial public offerings (IPO) may still perform well.

“Investors are just nervous about the big unknown which is Omicron with more scientific data coming out in the next two weeks about vaccine escape, transmissibility, and mortality,” First Metro Investment Corp. (FMIC) Head of Research Cristina S. Ulang said in a Viber message on Tuesday.

The emergence of the Omicron variant rattled stock markets around the world, as reports suggested it is more transmissible than the Delta variant. Some countries have already tightened restrictions to curb Omicron’s spread.

The Philippines has yet to report any local case of Omicron. It is currently under Alert Level 2, with new daily infections continue to decline.

Economic managers are hoping the country will be placed under the most relaxed COVID-19 alert level by January to help the economy recover faster. All businesses would be allowed to operate at full capacity under Alert Level 1.

Ms. Ulang said the economy is expected to continue reopening, noting that jitters over Omicron are “very temporary.”

“We will see more sizzling IPOs,” she added.

Concerns over COVID-19 may have affected Medilines Distributors, Inc.’s stock market debut on Tuesday, as its shares closed 30% lower than its IPO price.

“This is the first time an IPO closed at [the] floor bottom on the first day of listing, despite market [ending] positive [and the IPO] more than two times oversubscribed as reported in news media,” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message on Tuesday.

Mr. Pangan said Medilines’ market debut may lead some investors to think twice before investing in IPOs.

“It will affect sentiment among investors as this will persist or stick to the minds of the investors who will rethink prior to placing them on a particular IPO and risk their hard-earned money,” he said.

Medilines did not have a stability fund, which is deployed to support the stock’s price on the market. Mr. Pangan said regulators should consider more policies to protect investors from market volatility “in order to achieve goals of increasing the number of investors [and] maintaining their credibility.”

“Not all volatility is bad as natural volatilities attract investors, but if it is [caused] by manipulation then regulators must act on this especially if there are negative reactions among investors themselves,” he added.

Asked if a stability fund should be required for companies planning to tap the capital markets, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said there are already other mechanisms to protect investors, such as lock-in periods.

“[Requiring a stability fund] would give greater appeal and protection for investors to somewhat support the price, but I am not sure if this could be imposed by regulators if market forces are allowed to determine the price in the market, while taking the interest and protection of the investing public into consideration,” Mr. Ricafort said in a Viber message on Friday.

PIPELINE OF IPOs
The Philippine Stock Exchange (PSE) still has a robust pipeline for fundraising activities this month and it has also recently approved Haus Talk, Inc., which will be the first IPO for 2022.

Solar Philippines Nueva Ecija Corp. (SPNEC) is scheduled to list at the PSE on Dec. 17. Meanwhile, EEI Corp. will list its follow-on shares at the local bourse on Dec. 23, while Philippine Estates Corp. is slated to list shares from its stock rights offering on Dec. 24.

Figaro Coffee Group, Inc. (FCG) moved its IPO to January, with the listing date set for Jan. 24.

Analysts said the success of future IPOs will depend on the companies’ fundamentals, financial performance, prospects, and the offer price.

“Although some market participants may feel spooked over the short term given the first day of the [Medilines] IPO, upcoming offerings may perform differently given that each listing may have varying characteristics, underlying market sentiment, among many other factors,” Timson Securities, Inc. trader Darren Blaine T. Pangan said in a separate Viber message.

FMIC’s Ms. Ulang said catalysts would include the reopening of the economy, improving inflation numbers, and low COVID-19 infection rates.

Japhet Louis O. Tantiangco, senior research and engagement supervisor at Philstocks Financial, Inc., noted that the economy is already “showing signs of strengthening recovery” which bodes well for investments in equities.

“If our economic recovery continues, then [the] general market sentiment is expected to be positive moving forward. For the upcoming IPOs to take advantage of this optimistic market sentiment, however, they must show attractive company fundamentals,” Mr. Tantiangco said in a Viber message.

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