The Philippines expects a decision from J.P. Morgan Chase & Co. within the quarter on its potential return to a key emerging market bond index, a move that could lure billions of dollars in new foreign investments.
National Treasurer Sharon Almanza said that while an announcement regarding the J.P. Morgan Government Bond Index–Emerging Market (GBI-EM) series is imminent, actual inclusion would follow a staggered timeline.
“They will make an announcement soon, but that will only be the announcement and not the actual inclusion,” Almanza said. “(We’re on) positive watch, so if they announce, it could be positive.”
The Philippines was placed on the bank’s positive watchlist in September, typically the final precursor to joining the GBI-EM Global Diversified Index. If admitted, analysts estimate Philippine peso bonds could carry a 1% weighting, forcing passive global funds to add local debt to their portfolios.
The inclusion would likely cover bonds issued from 2023 with maturities of up to 20 years.
Manila has been fast-tracking reforms to meet J.P. Morgan’s liquidity and operational standards. Efforts include implementing tax treaties for foreign investors and central bank measures to deepen the repurchase (repo) market.
“Not all the requirements, but we’ve made strides. There are a lot of improvements,” Almanza said.
However, a technical “pricing” hurdle remains. Unlike global markets that use “gross pricing,” the Philippines currently quotes bonds with withholding tax embedded.
The Treasury is now consulting with the industry to transition to international conventions to clear the path for entry.
