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Philippines lags way behind in markets index
Publication Date : 22-02-2013
For the last decade, the Philippines’ weight on the influential MSCI Emerging Markets Index has remained insignificant, at below 1 per cent, despite the growth in the local equities markets in the past few years.
For this to increase, a visiting MSCI executive said more companies must go public, increase their free float and provide more room for foreign investors.
Chia Chin Ping, executive director at global asset indices and portfolio analytics provider MSCI, said yesterday that any adjustment in a country’s weight would depend on the dynamics of prices, number of shares, movement in prices and free float factor.
“If there will be a lot of IPOs (initial public offerings), that’s going to increase opportunities for investors. As we reflect that opportunity, that will translate to more weight,” said Chia, who is also the head of MSCI’s equity research for Asia-Pacific.
The indices are, however, also influenced by how other markets are faring, he added.
“It’s a relative picture. You need to look at your neighbours’ activities. For instance, China has expanded a lot. Ten years ago, there was no China,” said the MSCI executive, who was in town on the invitation of the CFA Society Philippines and Fund Managers Association of the Philippines.
When a big neighbouring country grows larger, he said the weight of the Philippines would inevitably shrink.
During this month’s quarterly MSCI rebalancing, there was no change in the MSCI Philippines index, which is composed of 18 companies. However, the Philippines’ share to MSCI’s emerging market trade flows and turnover has gone down to 0.981 per cent from 1.01 per cent as the shares of other bigger emerging markets like China (18.733 per cent from 18.57 per cent) went up.
On the PLDT foreign ownership issue, Ping said MSCI was closely monitoring this development. “Depending on how you interpret the rule, that could change the free float factor,” he said. Chiang said MSCI was still waiting for Philippine regulators to make the final decision and come to a final resolution.
The Securities and Exchange Commission is still preparing the guidelines on the definition of foreign ownership for purposes of compliance to the 40-per cent foreign ownership ceiling prescribed by the Constitution on partly nationalised industries like utilities and real estate.
PLDT has a 7.6 percentage share in MSCI Philippines and is among the Philippine companies with the largest index weight.
MSCI Philippines is composed of 18 companies, which also include SM Investments (13.2 per cent), Ayala Land Inc. (10.1 per cent), SM Prime (8 per cent), PLDT (7.6 per cent), BDO (7.3 per cent) and Aboitiz Equity Ventures (7.1 per cent).
Others in the MSCI Philippines roster are BPI (4.7 per cent), Ayala Corp. (6.4 per cent), Metrobank (1.5 per cent), AGI (4.8 per cent), URC (5.1 per cent), ICTSI (4 per cent), EDC (3.5 per cent), San miguel Corp. (3.5 per cent), Aboitiz Power (4.7 per cent), Jollibee Foods (3 per cent), DMCI Holdings (3 per cent) and Globe telecom (2.5 per cent).