GSIS allots P2B for local stocks

GSIS president and general manager Robert Vergara: P2 billion for additional investments in domestic capital market. PHOTO FROM gsis.gov.ph

MANILA, Philippines—The Government Service Insurance System (GSIS) has earmarked P2 billion for additional investments in the domestic capital market, projecting that the local stock market would post a double-digit gain in 2014.

Robert Vergara, president and general manager of the GSIS, said Wednesday that the state-run firm would like to take advantage of the income opportunity projected for next year from the local market.

He said the GSIS was in the process of selecting two to three local fund managers to formulate and execute an income strategy for the additional P2-billion investment that the pension fund intends to make.

Although the fund managers to be selected would be given flexibility in decision-making, Vergara said that the GSIS preferred higher-yielding stocks over fixed-income instruments.

He noted that for the GSIS to maintain the actuarial life of its fund, it has to generate at least 8.5 percent in investment yields every year.

Asked for his projection on the movement of the Philippine Stock Exchange index (PSEi)—which fell and broke into the 6,100 level on Wednesday—Vergara said the lowest it could hit was 5,600 before closing the year at the range of 6,000 to 6,500.

In 2014, he projected PSEi could post a gain of anywhere between 10 and 15 percent to hit the 7,400 level.

“If the economy keeps on growing by the robust rate seen recently, that gives room for corporate profits to increase and the [stock] market to grow,” Vergara told reporters at the sidelines of the CFO of the Year Award organized by the Financial Executives Institute of the Philippines (Finex).

Vergara said the GSIS has about P725 billion in investible funds, of which nearly 17 percent are in equities and 45 percent in fixed-income instruments, mostly government securities. The rest are in cash and other assets.

Vergara said the GSIS could use P2 billion of its cash for additional investments. If market opportunity dictated it, he said, the GSIS could also pull out some funds from existing portfolio investments and add to the one being prepared.

He said an industry that the GSIS was interested in investing in was banking. “Banks will be long-term beneficiaries of a growing economy,” he said.

Vergara said the GSIS was looking forward to the recently announced equity issuance before the end of the year by a few banks, including Bank of the Philippine Islands and Philippine National Bank.