New stock index for passive investors planned
Fund manager First Metro Asset Management Inc. (Fami) has teamed up with leading global index provider MSCI to create a new Philippine index for passive investors who want to ride on stocks that benefit from the consumer-driven domestic economy.
The new index, First Metro Index, is a subset of the MSCI Philippines investible market index. It contains 18 companies deemed as “key drivers of Philippine economic growth,” Fami president Gus Cosio said in an interview.
“Passive investing has become a global trend,” Cosio said. “At the heart of passive investing is index investing.”
The index seeks to provide investment tools to people who don’t want to actively manage their investment portfolio but are willing to track certain benchmarks like MSCI indices.
The top 10 constituents of the First Metro Index are: Ayala Land, SM Prime, BDO Unibank, Ayala Corp., PLDT Inc., Universal Robina Corp., Jollibee Foods Corp., GT Capital Holdings, Metro Pacific Investment and Bank of the Philippine Islands.
Each of the 18 stocks in the First Metro Index is seen as “highly liquid, fundamentally sound and tradable,” forming a basket that can guide investors who want to buy into the country’s consumption theme.
Cosio said Fami had contracted MSCI to be able to use their methodology in constructing its own index by picking up constituents from MSCI’s existing universe. In effect, First Metro Index contains less than half of the 44 constituents of the MSCI Philippines investible market index.
First Metro Index seeks to differentiate itself by focusing on companies where 70 percent of revenues are driven by personal or family consumption expenditure like homegrown fast-food giant Jollibee Foods Corp., food and plastic input manufacturer D&L Industries and leading canned food producer Century Pacific Food Inc., Cosio explained.
The new index also includes companies that may not be classified outright as consumer stocks but have a lot of consumer spending woven into its business, like telecommunication companies which drive popular apps and e-commerce platforms like Netflix, Spotify and Lazada, Cosio said.
“You also have companies like SM Prime and Ayala Land which derive a lot of revenues from malls. There’s GT Capital which is into motor vehicles,” Cosio said.
“The difference between this from PSEi (Philippine Stock Exchange index) and MSCI is this index takes into consideration consumption patterns,” he said.
“We’d like to give the market another measure, because right now it’s only the PSEi,” Cosio said.
By creating this index, Cosio said Fami would also want to cater to a global audience seeking a more focused index tracking companies with a significant impact on domestic consumer spending.
