SSS plans hike in exposure to stock market

The Social Security System is looking to increase its exposure to the stock market, in anticipation of a boost in equity prices following the investment grade given to the Philippines by the Moody’s Investors Service.

In an interview with the Inquirer, SSS President and Chief Executive Officer Emilio de Quiros Jr. said the state-owned pension fund manager could maximize its allowable exposure to the stock market as dictated by its charter.

The SSS is allowed by law to place as much as 30 percent of its investment reserve fund in stocks.

Currently, at least 20 percent of its estimated P350 billion in investment reserve fund is invested in equities.

The state-owned firm has equity exposure to various sectors, including banking and finance, telecommunications, real estate, utilities, infrastructure and power.

“As far as we [the SSS] are concerned, the investment grade from Moody’s will strengthen prices in the stock market. Foreign investors will be encouraged to go to the Philippines and that will provide additional demand for local equities,” De Quiros said during the interview Friday.

De Quiros also said the shutdown of the US government would likely entice foreign investors to shift funds to stable emerging markets, such as the Philippines.

As such, he said, investing in peso-denominated securities at this time was prudent.

He said the SSS would likely buy more stocks from a wide range of sectors, although it was most interested in the power.

De Quiros said the SSS hoped that the market recovery would boost the investment income of the SSS.

The pension fund manager generated P18 billion in investment income in the first semester, 2.6 percent lower than its earnings in the same period last year.

The decline was attributed to the heavy withdrawal of foreign funds, including investments in stocks, from emerging economies amid reports the US Federal Reserve would soon end its stimulus program.

De Quiros, however, said the equities market was considered to be on an uptrend.

He expressed optimism that the recent upgrade of the country’s credit rating by Moody’s would sustain the positive momentum.

Moody’s on Thursday raised the country’s credit rating by a notch to Baa3, which is the minimum investment grade.

It cited the favorable macroeconomic fundamentals of the Philippines, including robust economic growth, benign inflation, and enormous liquidity in the domestic economy that reduces the government’s reliance on foreign funding.

Moody’s was the last of the three major international credit rating agencies to give the Philippines an investment grade.

Fitch placed the Philippines in investment status in March, followed in May by Standard & Poor’s.