The Philippine Stock Exchange (PSE) said it would need to further educate the public about investing in stocks to sustain the sharp increase in the participation of individual investors in the market.
During the recent forum titled “Beyond the Pandemicrisis” organized by Maybank and ASEAN Exchanges, PSE President and CEO Ramon S. Monzon said he wants individual investors to stay in the market for the long term and not go for speculative stocks which can cause them to lose money.
“If they lose money, they would be disincentivized in participating in the market. For the PSE, we’re really boosting our investor education initiatives to make sure that retail investors are adequately protected from speculative investments,” Monzon said.
At the start of the year through the first quarter, Monzon said average trading volume rose 74 percent to 55 percent in the previous year, while retail participation rose to 43 percent from last year’s 27 percent.
The deluge of trading activity from retail investors, however, has clogged the system of some of the local stock brokers, causing them to stop accepting new clients.
COL Financial Group Inc., for instance, started to limit the number of new clients at the start of the year and halted the acceptance of new ones as activity surged by at least five times.
COL has the most number of individual investors among the local online stock brokers in the country. It has about 404,000 customer accounts with net equity of P78.45 billion as of September.
Data from the PSE showed that local investors accounted for 75.3 percent of value turnover in January while foreign investors accounted for the remaining 24.7 percent of transaction value.
This is the highest local investor participation on a monthly basis since March 2010, when it hit 76.2 percent.
The value turnover ratio was 56.8 to 43.2 in favor of foreign investors in January 2020 and 54.6 to 45.4 in favor of local investors for the entire 2020.
As of July 2, foreign activity only averaged at 32 percent and the rest came from the local market.
Monzon said the PSE wants to sustain this by introducing several indices, possibly within the year, to cater the diverse preferences of investors.
He said the PSE may introduce an index for mid-cap stocks and for firms that give high dividends. There are also plans to introduce an index for ESG or environmental, social and governance compliance of companies.
The mid-cap and the high-dividend yield indices can be launched this year, but the ESG index may have to wait longer as the Philippines needs to look at how other markets in the region rolled out the index.
“Investments on the fixed income securities like the green bonds have been happening during the last three to four years, but in the equities market it has not happened. We started disclosure framework to allow investors to know the ESG compliance of listed firms. We want to create an ESG index but it is not just as easy as that. You need to craft rules [for it],” Monzon said.
Image credits: Nonie Reyes
