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.
Thursday, 28 June 2012
MANGUN ON MARKETS
SOMEONE asked me the other day which newspapers I read. The answer is all…except, for the most part, the foreign press. The Wall Street Journal, New York Times, Reuters News Service and the Associated Press makes our two major newspapers seem like perfect examples of neutral reporting, which of course, they are not.
The unemployment numbers in the US have been bad for 40-straight months, and the financial pages of those foreign papers still call it “unexpected” every time data is released.
Nevertheless, yesterday was a strange news day for me. While we expect different opinions, the stories in yesterday’s local press bordered on the bizarre.
From the Philippine Star: “DBS revised its forecast for the peso, which it said would average at 45:$1 in the fourth quarter this year from the previous 42.50:$1. The financial service provider based in Singapore also said that the local currency would further weaken in the third quarter when it would average at 45.50 against the dollar.”
Next, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P), said they “expect the local currency to weaken to an average of P43.27 in June, P43.453 in July and P43.34 in August, from the current P43 to $1.” No offense, but a “weakening” of 45 centavos is nothing. That can happen in a couple of weeks under normal peso trade fluctuations. I wonder how much these people are getting paid for that analysis.
But what makes the analysis bizarre is that “Last week, FMIC President Roberto Juanchito Dispo was quoted as saying that the peso could hit an average of 42 against the dollar this year.”
42, 43, 43.50, and 45.50: I am sure glad we can depend on all these highly trained experts to help us plan our financial decisions regarding the peso. Perhaps our companies that import and export would do better to consult a local manghuhula about the future of the peso.
To be fair, FMIC and UA&P did give their rational as that the US dollar would always be the safe haven in these uncertain times. However, they ignore the real reason why the peso moves. The peso goes higher when people sell dollars and buy pesos. The peso goes lower when people buy dollars and sell pesos.
One reason we buy dollars is to pay for oil imports. Except, the demand for dollars to buy oil is dropping like a rock as are local gasoline prices. Shell announced yesterday a P1.80 drop in the price of unleaded gas. Good. More money for me to put into the stock market.
DBS said the reason the peso would go down is that the peso is up because of better economic growth that they do not believe can be sustained. Didn’t some experts in government forecast 7-percent growth for the year? And the experts at the World Bank figured first-quarter growth at 4.2 percent and not the 6.4-percent actual growth.
But then the PhilStar has an article quoting another expert, a UA&P economist. He is worried about the peso going to 30 or 40 to the dollar and that all the overseas Filipinos will then default on their local home loan purchases, thereby destroying the property sector and killing the banks. He should talk to the people at DBS and decide where the peso is headed.
Even though, I think the banks can handle it. Nonperforming loans fell 11 percent from 2011 and are only 2.3 percent of total loan portfolios. If it keeps going like this, the only problem loan they will have to worry about will be my EastWest Bank MasterCard. (I will pay next week. Promise.)
I don’t expect the foreign experts to understand the Philippines. They still can’t figure out why after 350 years of Spanish colonization, no one speaks Spanish.
But the local experts should be a little more reliable unless they have never been to an SM Mall or a palengke.