The Philippine market features a broad range of financial instruments but overall liquidity in most sectors is thin. The country’s currency is not yet freely convertible and spot and forward trading is negligible. The lack of currency convertibility has made foreign access to local debt and equity investments difficult and has kept many institutions from participating. The domestic bond market remains extremely fragmented with true liquidity existing in only certain benchmark instruments; the equity market, though growing on a primary basis, is thinly traded apart from the largest capitalization stocks. The illiquid and restrictive nature of the local markets has slowed development of domestic derivatives considerably; the country’s primary success has come in listed commodity futures, where hedging activity in key commodities has created reasonably deep liquidity. Despite the current limitations greater advancements in domestic derivatives are expected as the local financial market deregulates and expands.
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