The Market Monitor Minding the Nation's Business
By Jerry Maglunog
Stock trading is not well accepted among majority of the 100 million Filipinos, according to John Mangun, a leading authority in stock trading. “Most Filipinos view stock trading as gamble that’s why so many are not keen on it,” the stock trader said.
Based on his assumption some years back, there are only less than one-half percent of Philippine population engaged in stock trading.
Mangun said some see stock as very complex that’s why many Filipinos are adamant to put their money in the bourse market.
A huge part of investments in the Philippine Stock Exchange (PSE) is part of hot money or portfolio investment. Former National Economic and Development Authority director general and Budget secretary Romulo Neri is among those that say investments at PSE are not reflective of a growing economy.
“Most of it are gambling money. BSP is having hard time to sterilize it. That’s why whatever the PSEi level reached, it doesn’t mean anything to ordinary Filipinos,” Neri said.
Stock markets around the world are sources of money that overflows from foreign funding. All the top bourses in the world, Nikkei and London Stock Exchange—are awash in cash that don’t come from poor people but select individuals.
The Wikipedia, the free encyclopedia, defines stock market as the aggregation of buyers and sellers (a loose network of economic transactions, not a physical facility or discrete entity) of stocks (also called shares); these may include securities listed on a stock exchange as well as those only traded privately.
Market participants include individual retail investors, institutional investors such as mutual funds, banks, insurance companies and hedge funds and also publicly traded corporations trading in their own shares.
Some studies have suggested that institutional investors and corporations trading in their own shares generally receive higher risk-adjusted returns than retail investors.
A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations.
Over time, markets have become more “institutionalized”; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions).
The rise of the institutional investor has brought with it some improvements in market operations.
There has been a gradual tendency for “fixed” (and exorbitant) fees being reduced for all investors, partly from falling administration costs but also assisted by large institutions challenging brokers’ oligopolistic approach to setting standardized fees.
The stock market is one of the most important ways for companies to raise money, along with debt markets which are generally more imposing but do not trade publicly.
This allows businesses to be publicly traded, and raise additional financial capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange affords the investors enables their holders to quickly and easily sell securities.
This is an attractive feature of investing in stocks, compared to other less liquid investments such as property and other immovable assets. Some companies actively increase liquidity by trading in their own shares.
For security and stock expert Harry Liu, a high PSEi means more people are into stock market. Liu, PSE chairman from 1996 to 1997, said the PSE is totally different today than 30 years ago due to different factors.
“The market is more reflective of the economy in a good market barometer,” the security expert, who heads his own firm, affirmed. If Neri doesn’t agree that high PSEi means there are more players in the bourse system, Liu said otherwise.
“Yes, it means more people are into the bourse. It also means more foreign funds and fund management companies,” the stock expert said. Among the new things that face good future at PSE, he listed the ETF as with the best future ahead because it brings the stock level to ordinary people who think stock trading is a complicated thing.
“It has good future,” the official said. Of all the positive views that came from Liu, he said many good things are now present at the exchange market than before. “The PSE is a listed institution and the public is held in a professionally-run exchange and lots of improvements for the safety of the brokers and the investing public,” he said.