OBG talks to Hans Sicat, President, Philippine Stock Exchange (PSE)

Interview: Hans Sicat

How would you describe the value propositions of new investment products the PSE hopes to launch into the local market?

HANS SICAT: By late 2013, we expect to begin exchange rated funds (ETFs), which remain the largest and fastest-growing asset class globally. We are also working on launching the Personal Equity and Retirement Account enacted by Congress, where investors can have their contributions matched and a tax referral mechanism from the government will help them maximise growth. Once an individual is accredited, a bank can offer a 401k equivalent through a qualified professional. The equity capital market would benefit, too, as any savings planning would include an equity component.

We are also working on getting more players to participate in our securities borrowing and lending programme. One major problem we realised with this initiative is that, though many local dealers want to borrow, they cannot find enough stock to borrow since lending is minimal. We are therefore working with big local pension funds, as they could easily augment the supply of stocks lent in our market. Another product we will see by the end of 2013 is the listing of PSE index futures in Singapore. This will provide more strategies that investors can use for our market. We are also launching a sharia-compliant stock programme to allow our Muslim brothers to participate in our market.

How can the PSE encourage the diversification of issuers and local investors?

SICAT: The composition of our average daily trading volume is 50% local, whereas in the past, foreign investors dominated. This welcome trend is one of the reasons our market has stayed active and resilient even when foreign participants pull out in the face of uncertainty abroad. There needs to be more participation from all investors – local, institutional and retail – especially given the money that has come back to the Philippines to support our economy. On the retail side, the PSE has a comprehensive investor education programme covering training, seminars, and workshops with people who need an update on how to invest in stocks. We have found the social platform to be a potent tool for this. Joint seminars between universities and financial institutions also serve to spread information about the stock markets, and we are working on making stock market topics mandatory for high school students.

To what extent can links between the region’s bourses speed the growth of domestic capital markets?

SICAT: Regional integration of services has already begun for Philippine companies like Universal Robina or San Miguel, which have production centres not only in the Philippines but throughout ASEAN. So the business sector has started the process of integration. In light of advancements in the financial sector and the goals of the ASEAN economic community, the PSE is working with regional exchanges in common ASEAN marketing initiatives. We also welcome links between the exchanges in Singapore, Malaysia and Thailand. From our end, we need to be prepared for this initiative from a regulatory as well as business standpoint.

How can technology create a more inclusive capital markets sector and attract retail investors?

SICAT: In line with the PSE’s strategy, we have launched PSET radex, a technology platform that allows broker-dealers to offer online trading services – especially those too small to create their own platform or with limited IT. As a result, we expect to double the number of brokers that offer online services over the coming months. A good target for this are workers in business process outsourcing, since they have a job, computer access and usually a bank account, thus are able to open a securities account easily. We are also launching an enhanced online disclosure system, acquired from the Korea Exchange, to ease the flow of information between listed companies and various information platforms. With this in place, disclosures can now be easily accessed by investors using mobile phones or tablets.