PSE plans new financial products for 2021

The Philippine Stock Exchange, Inc. (PSE) is eyeing to launch new financial products next year to lure foreign investors back to the local bourse.

In a forum by the Financial Executives Institute of the Philippines on Wednesday, PSE President and CEO Ramon S. Monzon said the bourse operator is planning to introduce new sector classifications and indices as part of its post-pandemic recovery plan.

“To attract foreign investors, we need to develop more financial products. We are coming up with new sector classifications by increasing our sectors from six to eight, and we expect this to be launched in the first half of 2021,” he said.

The PSE currently classifies sectors into six indices: financials, industrials, holding firms, property, services, and mining & oil.

The PSE wants to increase this to eight with financials, industrials, holding firms, property, mining & materials, consumer, energy & utilities, and technology, media and telecoms.

This plan was initially slated for 2020, but because of the coronavirus pandemic, it was postponed to the first half of 2021.

“We will also be introducing new indices…(and pushing for the) creation of new ETFs (exchange-traded funds) and other index-linked funds. We hope to launch these new products in the second half of 2021,” Mr. Monzon added.

Regarding the new indices, the PSE wants to introduce an index that tracks the performance of mid-cap companies and high dividend issuers.

The ETFs are securities that track an underlying index, which allows investors to monitor stocks across industries with less expenses on brokers.

Aside from financial products, the PSE hopes to increase market activity by amending the listing rules to attract more companies to list, and allowing investors to engage in short selling.

Short selling refers to the sale of a security that is not owned by the seller, but will be settled by the delivery of borrowed securities. An investor can generate profits by selling borrowed securities at a time of higher prices, then buying them at a lower price in the future.

The Securities and Exchange Commission has approved short selling guidelines in 2018, but the PSE is still securing regulatory approval for the global master securities lending agreement, the offshore collateral for foreign investors, and the application of the Philippine Depository and Trust Corp. to be a securities lending agent.

“We’re enabling our algorithmic trading, although in a regulated environment, to be adopted starting next year. We’re working on reducing the minimum commission rate on direct market access transactions. And hopefully, we will be launching the short selling program very shortly,” Mr. Monzon said.

The PSE has recorded a net foreign selling of P109 billion year to date, reversing its net foreign buying of P1.25 billion in the same period last year. Foreign buyers have been net sellers for 161 days out of 191 trading days this year, as investor sentiment remains dampened due to economic recovery worries.

The PSE index closed at 5,942.66 on Thursday, down 24% from its 7,815.26 close in end-2019.

By Denise A. Valdez, Senior Reporter|BusinessWorld

Source: Peso Economics