Under its development agenda, the Philippine Stock Exchange is set to become more accessible to retail investors

 

Considered one of the oldest bourses in Asia, the Philippine Stock Exchange (PSE) traces its roots back to two former bourses – the Manila Stock Exchange (formed in 1927) and the Makati Stock Exchange (founded in 1963) – which were unified in 1992 to form the PSE.

The PSE has two wholly owned subsidiaries, the Securities Clearing Corporation of the Philippines, which primarily works as a clearing and settlement agency, and the Capital Markets Integrity Corporation (CMIC), which functions as the PSE’s independent audit, surveillance and compliance unit for the trading activities of brokers. The PSE also owns 20.98% of the Philippine Dealing System Holdings Corporation, the holding company of the fixed-income exchange operator.

A Venue for Growth

The PSE exists primarily to provide domestic businesses an opportunity to expand by raising capital through the stock market. The exchange has proven to be an efficient engine for growth, as listed companies turned in robust aggregate earnings of P723.6bn ($14.3bn) in 2017, up 4.6% from P691.62bn ($13.7bn) the previous year.

Meanwhile, the investing public is empowered by the PSE through their participation in the stock market, allowing them to channel their savings into meaningful investments and take part in the growth of Philippine companies. Stock market accounts have almost doubled since 2008, reaching 868,810 at the end of 2017. Online accounts, which comprise around 45% of the total, have grown by a compounded annual rate of 35.1%.

Pursuit of Progress

In the past few years the PSE has been able to move forward with structural reforms, operational improvements and capacity building. Various products and services were launched in 2013, including the PSE’s first exchange-traded fund and the quarterly list of sharia-compliant securities. In the same year the co-branded Singapore Exchange (SGX)-PSE MSCI Philippines Index Futures were listed at the SGX.

More recently, to attract foreign and local investors and provide both with equal opportunities, the PSE established rules for dollar-denominated securities, which were launched in April 2017. The PSE was likewise successful in expanding its line of market data products and in implementing revisions to management of the PSE Index Series to ensure that it retains global standards and is responsive to changing market needs.

In line with the broadening of its products and services, the PSE has strengthened its infrastructural capacities, particularly through its migration to a new trading system in 2015, the move to new headquarters, modernised business continuity practices, and the implementation of a new front-end trading system.

Liquidity and awareness enhancing initiatives also form part of the PSE’s growth strategy. These include the launch of the online trading platform, PSET radex; the PSE EDGE disclosure portal and mobile application; and market education initiatives such as webinars and roadshows. Activities to foster better corporate governance have also been pursued through the Bell Awards and the establishment of the CMIC. In January 2018 these developments led to the PSE being named as the Best Stock Exchange in South-east Asia, the fourth time in the last five years, by investment magazine Alpha Southeast Asia at its annual Marquee Awards.

Fulfilling Its Vision

The PSE is now equipped with a strategic agenda that reflects its broader perspective and deeper understanding of how to develop the local market. While the PSE takes pride in its achievements, there is much work to be done to realise its vision of becoming one of the premier exchanges in the region.

For 2018 the PSE will be working on the introduction of higher-quality products and services into the market. Foremost among these is giving investors the ability to hedge via short selling. New stock indices will be launched and the sector classification system revamped to provide investors with more information. Lastly, the PSE will make its local small investors programme more accessible to retail investors via an online platform that can be accessed from anywhere in the Philippines.

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The Report: Philippines 2018

Capital Markets chapter from The Report: Philippines 2018

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