OUTSIDE THE BOX
THE Philippine Stock Exchange (PSE) recently released a report, “Stock Market Investor Profile 2011,” detailing the size and demographics of PSE investors.
It paints an interesting and disappointing picture of our local stock market. However, it shows exactly, if anyone cared, what could be done to increase participation in the local market.
There are some 500,000 open stockbrokerage accounts with member-firms and participants. Local holders are 98.6 percent of that total number with foreigners making up only 1.4 percent of the accounts.
The truth is that probably at least half of that 500,000 are more or less dead accounts with little or no trading activity. Only 31 percent of local accounts are active versus some 49 percent of foreign accounts.
The gender demographics are that nearly 60 percent of all retail, personal, accounts are held by men. While that may not seem “fair” from my 38 years in this business from New York to London and Manila, I would say that Filipinas are much more active in the market than women in almost all other countries.
The age and employment numbers as well as the income distribution, 30 percent in all annual income groupings from less than P500,000 to over P1 million, are not meaningful in my opinion. Further, the profile does not include the large amount of investors in mutual funds and other pooled-fund investments.
Two significant factors do emerge from this study. People in Metro Manila make up 75 percent of the investors. As you go farther from the stock-market action, the percentage drops to only 2.3 percent in Mindanao and the millions of overseas Filipinos are almost nonexistent.
The PSE itself has tried through information and educational seminars to bring the stock market to people outside the NCR but it is a futile exercise. The cost of a stockbroker maintaining provincial branches is unreasonably high and few have made the investment. The reason the PSE cannot bring in more provincial investors is that this business requires constant contact with participants to thrive and be active. It is not like insurance where the policy is sold once and the insurance company representative sends birthday greetings once a year.
Investors need constant information and constant contact with their stockbroker to be active. And individual stockbrokers do not make a lot of money in the Philippines. I guarantee you that. Therefore, they concentrate their time and effort on a few select clients.
Online trading is becoming a bigger business with trading volume up from 16 percent of the total in 2010 to 21 percent in 2011. However, the peso value of total market activity is only 7 percent. This probably means that online is being used either by the active smaller investor or the larger investor that trades occasionally and uses online to monitor positions and prices.
Local stock-brokerage firms do as good a job as to be expected, given the size of the country and the logistics of keeping in contact with clients. Nevertheless, the Philippines has got to be one of the few places outside of the jungles of Africa where there is no real-time coverage of the trading activity through the easily available local media. If the PSE is an Old Boy’s Club, it is a club that is hard to find.
Why the PSE does not have its own cable channel with real-time prices and commentary is simply ridiculous. If the PBA operated the way the PSE does, basketball games would not be televised but you could read the score in tomorrow’s newspaper.
There are a few of us out here that provide the service that investors need to be active. One I know of sends a daily as well as a weekly market letter to clients. My personal subscribers receive a weekly written analysis as well as a morning and after-market audio briefing.
Honestly, the PSE and its trading firms are behind the times in investor service and the trading numbers show it.
E-mail to firstname.lastname@example.org, Web site is www.mangunonmarkets.com, and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by COL Financial Group Inc.