- Written by John Mangun / Outside the box
THIS
has been the century of the Philippine Stock Exchange (PSE). Since the
beginning of the last decade, the local stock market has tripled in
value. Billions upon billions of pesos have been invested in
Filipino-owned companies. Dozens of small and large companies have
listed in the PSE, converting family-held corporations to allow anyone
to be an owner and share in their growth and profits.
However, public
participation in the PSE is dismally low in comparison to the population
and to our regional neighbors. And the biggest winners who have taken
advantage of this financial boom in the Philippine stock market are
foreigners.
Although it is one of
the oldest stock markets in Asia, the PSE has yet to fulfill its
purpose. The stock market was designed as an institution where
established companies could take the next leap forward by raising
capital in exchange for surrendering some privately held ownership.
Companies with new, but tested and feasible, ideas should be able to
come to the stock market to raise money to make those ideas a reality.
Even long-established and financially successful companies, at some
point, need to raise additional money.
One of the founders of
the Bank of New York was Alexander Hamilton, the first US secretary of
the Treasury. The bank was founded in 1784, making it the oldest bank in
the United States. In 1792 its corporate stock became the first one to
be traded on the New York Stock Exchange (NYSE), as it raised money to
increase its financial strength.
Certainly, companies
take advantage of the stock market to increase their owners’ wealth,
rather than to strengthen the company. The recent initial public
offerings of Facebook Inc. and Twitter Inc. probably made those
companies’ founders richer than the ones who bought the publicly listed
stock.
But a stock market is a
critical part of a nation’s financial system and its capital markets.
Further, it is a way for ordinary citizens to participate in the growth
of the economy, as corporate growth fuels economic growth.
The Philippine economy
and Filipino companies are enormously larger now than they were 20
years ago. Yet, public participation in the PSE is almost the same as
back then. The availability of stock-market investment vehicles for the
public is now more user-friendly than it ever has been. Yet, Filipinos
still do not invest.
You do not need to be
wealthy to invest on the PSE. Unit trusts, mutual funds, the new First
Metro Exchange Traded Fund—these offer ways for almost everyone to
participate. An investment of P5,000 every three months is reasonable
and acceptable.
The other
disappointing thing is that, while Filipino nationalists encourage us to
try locally produced goods and reduce dependence on imported ones, many
of the largest companies in the country have substantial foreign
ownership. We try to buy locally produced products and, yet, the profits
from our purchases go to foreign owners who are based abroad.
The PSE, local
stockbrokers, banks and independent financial consultants have invested
many years trying to educate the public about the investment
possibilities of the stock market. There has been a large outreach to
get Filipinos to understand the advantages of stock-market investing.
The “Old Boys’ Club” image is just plain silly. The idea that you have
to be an expert to invest is wrong. Professionally managed mutual funds
have a good track record.
Local companies pay
dividends well above what people can get from saving in a bank. And
putting a portion of excess wealth in the stock market is good for the
country.
So what is the problem with this lack of public investment in the PSE?
All listed companies
should have employee stock-purchase programs, not just for executives,
but for the lowest member of the rank and file. Employees who feel they
are owners do a better job. Further, these employees have a financial
stake in the stock market.
The PSE itself should
be more pro-active, and not just with its educational seminars. Public
ownership of US stocks boomed when the NYSE began an advertising
campaign in the 1970s: “Invest in the NYSE, Invest in America.” And the
only time we hear the government talk about the stock market is to take
undeserved credit whenever stock prices soar.
A viable and
profitable partnership between the public and listed companies is
important for both. Increased public ownership makes companies more
responsible to its shareholders. Investors have a greater sense of
involvement in the nation’s corporate life. Greater public ownership can
help bridge the socioeconomic divide.
All those benefits are good for the Philippines.
E-mail me at
mangun@gmail.com. Visit my web
site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets.
PSE stock-market information and technical analysis tools provided by
the COL Financial Group Inc.
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