PSE lists first index-linked fund

The Philippine Stock Exchange index-tracking First Metro Philippine Equity Exchange Traded Fund (FMETF), the country’s very first exchange-traded fund, debuted on the local stock exchange Monday as proponents shared bright prospects for underlying local stocks in the coming year.

Rather than buying all 30 stocks in local barometer PSEi, the new instrument First Metro ETF opens market access even to ordinary investors even with a small amount of participation, said Roberto Juanchito Dispo, president of First Metro Investment Corp., which sponsored and organized the pioneering fund.

After a heavy pipeline of initial public offerings this last quarter that sucked up a lot of liquidity in the stock market, the recent market pullback allowed FMETF to offer the funds at relatively low values, Dispo said.

FMETF offered the funds at an opening net asset value (NAV) per share of P99.20. On its trading debut, the share price of FMETF gained 0.81 percent to close at P100.

The fund has an authorized capital of P3 billion, which Dispo expects to fully use up by the first quarter of 2014. At present, 7.5 million out of FMETF’s 30 million shares authorized by the PSE for listing have been issued at a par value of P100 each.

Like mutual funds, an ETF pools funds by selling shares to the investing public. But unlike mutual funds, its price is quoted real time so investors immediately know the buying or selling price of their ETF shares. ETF investors may buy or sell shares through stockbrokers.

By the end of the year, Dispo said the PSEi could climb back to the 6,400-6,500 levels due to the traditional window-dressing activities common in various markets across the globe, the US economic recovery benefiting emerging markets and spillover of excess liquidity as more funds are unlocked from the local central bank’s special deposit accounts (SDAs).

In the last 10 years, Dispo said the PSEi had been growing at an annual average 15 percent.

Gus Cosio, president of First Metro Asset Management (the fund manager of FMETF), said the local equities market would likely be turbulent in the first quarter of 2014 but the start of public-private partnership (PPP) projects as well as the rehabilitation efforts (post-Typhoon and earthquake disasters) should boost economic activity. He said this should support the PSEi’s recovery toward 7,200 by the end of next year.

Ismael Cruz, president of IGC Securities, said a projected corporate earnings growth of at least 10 percent next year would support such index recovery to at least 7,200 next year.