The Philippine Stock Exchange (PSE) has released new rules for listed firms to qualify for the PSE index—the gauge for the performance of the local stock market.
President and Chief Executive Officer Hans B. Sicat announced that the new rules require listed companies to have at least a 12-percent free float, rank among the top 25 percent by median daily value per month for at least nine months for a year, and to be among the top 30 firms, based on full market capitalization.
In memorandum CN 2016-007 issued last February 24, the PSE said the re-composition of indices will be made based on the review of the PSEi and sectoral indices covering the trading activity for the period January 2015 to December 2015.
To qualify for the sector indices, companies must rank among the top 50 percent in median daily value per month for eight months of a year.
To provide stability in the selection of PSEi-member companies, a company shall be inserted in the PSEi if it rises above the 25th position by full market capitalization to replace the company that ranks the lowest.
A company is delisted from the PSEi if it falls below the 35th position by full market capitalization based on the new rules.
The vacancy shall be replaced by the highest-ranking company by full market capitalization in the reserve list based on the weighted average volume price for 10 trading days prior to the deletion. All changes will take effect on March 14.
With index expected to hit 8,500 by midyear, the local bourse remains the best venue for investments.
Since the start of 2016, gainers have overtaken events at the PSE, with the perennial top gainers two years ago remain the best as far as investing is concerned.
“When you think of investments definitely what will come to your mind are foreign money. Anyone who wants to do business in any country will go to stocks because they can their investments anytime they want,” Harry Liu, PSE chairman from 1996 to 1997, said.
However, the former PSE chairman said the very small number of people engaged in stock market is detrimental to the growth of the bourse market. In 2012, it is estimated that only 0.7 percent of the population is into stocks.
This figure is very small compared to other ratio of population to stocks in Malaysia (4 percent), Thailand (6.3 percent), Singapore (8 percent) and Indonesia (3 percent).
“It’s a very small percentage of the population engage in investing in the stock market. In fact, the PSE has a department directed to educate and reach out to get more people to invest in the stock market,” Liu added.
Liu said the more people getsinvolved in stocks, the better for the economy as it will mean more jobs as firms where investors put their money will surely grow further.
“If we can reach out more and teach the proper investing and understanding to more people, it will help more people earn extra funds seating idle,” he said.
“It will help good companies to generate and raise capital for growth. So the companies, economy and the people will benefit in the long term,” Liu said.
Maybank ATR Kim Eng Capital Partners, Inc. President and Chief Executive Officer Manuel Tordesillas said the country must take advantage of the Philippines’s status today as one of the fastest growing economies in Asia. He said the average GDP growth sustained at about 6 percent for the last five years should be utilized more to attract more people to go into stocks.
He said the country’s fundamentals remain solid, and are expected to record a full year GDP growth of 7 percent in 2016 after registering a strong growth of 5.8 percent in 2015. The implementation of big-ticket infrastructure projects is expected to boost development over many years as well as stimulate the broader economy through multiplier effects.