(Bloomberg) -- Fund managers in the Philippines expect to be included this year in the market for bond repurchase agreements, a development that could pave the way for more investments in one of Asia’s fastest-growing economies.
Non-bank financial institutions have secured approval from the national revenue agency to exempt transactions under the government securities repo program from the documentary stamp tax, once they are allowed to participate, according to Helen Oleta, president of the Fund Managers Association of the Philippines.
The industry is also pushing for the Insurance Commission to allow insurance firms to participate in repos, Oleta said in an interview. Once that’s done, the Securities and Exchange Commission can allow all non-bank financial institutions as market participants, she added.
“The buy side is very crucial as well in realizing the objective of developing the capital market, specially in the GS repo market,” Oleta said, using an acronym for government securities. “Everyone is excited.”
The Philippines is looking to deepen its capital market, preparing for increased demand for financial instruments as its economy expands and the need for infrastructure spending rises.
Last year, it introduced revamped interest rate swaps and signaled it aimed to relaunch repos as part of reform plans such as cutting the process for taxing residents of countries covered by tax treaties. A developed capital market helps businesses raise money apart from bank loans and provides more options for investors.
Oleta said the market’s potential for growth is huge given the size of outstanding government securities and assets under management at Philippine trust firms. As of end-December, the industry has AUM of about 6.3 trillion pesos ($110 billion), she said.
A developed capital market is a potential growth pillar for a country which mainly relies on domestic consumption, remittances and business process outsourcing to spur its economy.
“Fund managers are the perfect participants because that will now support a deeper and more active market,” Oleta said. “We need to grow our markets to catch up with our Southeast Asian peers both in the fixed income and especially in our equity market.”