PH lags way behind neighbors in MSCI index


For the last decade, the Philippines’ weight on the influential MSCI Emerging Markets Index has remained insignificant, at below 1 percent, 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 on Thursday 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 neighbors’ 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 neighboring 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 percent from 1.01 percent as the shares of other bigger emerging markets like China (18.733 percent from 18.57 percent) 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-percent foreign ownership ceiling prescribed by the Constitution on partly nationalized 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 percent), Ayala Land Inc. (10.1 percent), SM Prime (8 percent), PLDT (7.6 percent), BDO (7.3 percent) and Aboitiz Equity Ventures (7.1 percent).

Others in the MSCI Philippines roster are BPI (4.7 percent), Ayala Corp. (6.4 percent), Metrobank (1.5 percent), AGI (4.8 percent), URC (5.1 percent), ICTSI (4 percent), EDC (3.5 percent), San miguel Corp. (3.5 percent), Aboitiz Power (4.7 percent), Jollibee Foods (3 percent), DMCI Holdings (3 percent) and Globe telecom (2.5 percent).

Originally posted at 07:29 pm | Thursday, February 21, 2013

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  • wawa2172

    Its difficult to attract foreign investors since calamities have been devastating the country. With corruption continue to exist and add to it the poor peace and order situation the country is doom. Where a tiger  economy now said PNoy. I guess he mistook Garefield as a tiger.

  • joboni96


    ng di masilip ng mga foreign carpetbaggers
    ang ating ekonomiya

    at lalong i plunder

  • mekeni62

    the government wants to attract and welcome more foreign investors but its door is half-closed.

  • Jean Claude

    abolish the foreign ownership rule! why would a foreign investor invest in a country that only allows him to own 40 percent!? Crazy provision in an outdated Constitution.

  • i_am_filipino

    Who would believe these liars chinese fake bullish ugly people

  • mr dt

    That’s not surprising: we know Apple sources a lot of product — in
    fact almost all of its products — from Asia, where the company has
    had significant challenges with suppliers maintaining legal and ethical
    labor standards, in spite of efforts by CEO Tim Cook and others
    to improve working conditions.
    But it is interesting to see the breakdown. Here’s a partial list of the countries Apple sources product from:

    Mainland China: 331 suppliersJapan: 148 suppliersUnited States: 76Taiwan: 35 suppliersMalaysia: 27Singapore: 25 suppliersPhilippines: 23 suppliersThailand: 17 suppliersUnited Kingdom: 7 suppliersIsrael: 5 suppliersAustria: 4 suppliers

    I guess that’s the definition of a multination corporation right
    there. Overall, with 88 percent of Apple’s supply chain in Asia, only 11
    percent of Apple’s suppliers are in its home country of the United
    States, and even fewer — seven percent — of Apple’s suppliers are in
    Europe and the Middle East.

  • Joseph

    Clearly these people at MSCI don’t know how companies work in the Philippines: they are family controlled! Good luck getting even 40% free float.

  • TagaMlang

    “During this month’s quarterly MSCI rebalancing, there was no change in the MSCI Philippines index, which is composed of 18 companies.”

    The PSE/SEC have made it difficult for new companies to join the PSE, that’s why most new companies, to enter the PSE, they go through the back door listing, that is, buying existing companies.

    With this strategy, the PSE will not be able to increase the number of listed companies.  As I understand it, the PSE have two listing categories, the “big board” and the “small board”.  

    I think, it should be in the “small board” that the PSE lightens its requirements.  A lot of small companies are interested to list but are hindered by stringent requirements.

    • Andres Bonifacio

      If we loosen the so called stringent requirements, and when retail investors start to lose money on these new companies, then guess who will they blame…its a no win situation…those requirements are there for a reason…to somewhat protect investors for scammers and swindlers! Still even with good companies, there is no guarantee one will make money in the stock market! 

  • Baket?

    MSCI failed to mention what’s happening in the Chinese stock market, especially the A shares. Many Chinese retail investors lost their shirts. It is said that the Chinese stock market investors lost all of their gains in the last ten years. The stock market in China remains depressed due primarily to slump in business, highly irregular accounting practices and many more. Check out Caixin (available in English).

    For all it’s talk of emerging markets index, MSCI never saw the Chinese stockmarket meltdown coming. That alone puts their credibility in question. All investors, retail or institutional, should do their own research carefully. Andy Xie, formerly of Morgan Stanley, was able to see the 1997 financial crisis ahead of his peers because he dug deep into Indonesia and Thai companies’ balance-sheets and kept a watchful eye on the ground. Launching an IPO is easy, verifying whether the company’s financial statement is true is not so transparent. Especially in emerging economies.

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