Ranks of yield-chasing retail stock investors increasing, says PSE

The lockdowns forced by the COVID-19 pandemic have created an army of cash-rich individual investors aggressively chasing yields in the local stock market.

The Philippine Stock Exchange (PSE) reported that as of Jan. 22, the retail or individual segment accounted for 52.2 percent of value turnover at the local stock market, while institutional investors accounted for the remaining 47.8 percent of trades.

“Retail participation started to expand when the pandemic started. In 2020, the retail market was responsible for 26.9 percent of value traded from 18.2 percent in 2019,” PSE president Ramon Monzon said in a press statement.

But the PSE is encouraging retail investors, especially those investing for the first time, to attend its monthly webinars.

“While we hope to see more local and retail investors in the PSE, we also want new investors to at least study stock market basics before investing,” Monzon said.

The PSE is hosting the following webinars this quarter: back to stock market basics on Feb. 5, investing in real estate investment trusts on Feb. 19, stock trading operations on March 5 and building a healthy investment portfolio on March 19.

Local investors, both retail and institutional, actively traded in the stock market in the first month of 2021. They accounted for 75.3 percent of value turnover in January with the remaining 24.7 percent of transaction value was attributed to foreign investors. This was the highest local investor participation on a monthly basis since March 2010 at 76.2 percent, the PSE reported.

In January 2020, before the pandemic induced tough lockdown measures in the country and elsewhere in the world, foreign investors accounted for 56.8 percent of trades in the local market. For the full year 2020, the balance titled in favor of local investors with a share of 54.6 percent.

New challenges

“This is the eighth consecutive month that locals outpaced foreign investors in terms of value traded in the stock market. Trading activity of foreign funds may have abated but liquidity in the stock market has not deteriorated. In fact, daily average value turnover is up 50.3 percent year to date and 82.4 percent year on year,” said Monzon.

In January 2021, daily average value turnover in the stock market reached P11.04 billion, compared with P7.35 billion as of end-2020 and P6.13 billion as of end-January 2020.

Meantime, volume turnover at the stock market hit a record of 1.43 trillion in January 2021 while value turnover for the month came in at P220.85 billion. In January 2020, 22.28 billion shares were traded, valued at P128.76 billion.

“Initial public offerings (IPO) usually serve as the entry point in the stock market of retail investors. We hope to have a robust IPO pipeline this year, including real estate investment trusts, to further grow the retail market,” Monzon said.

The PSE encourages local small investors to subscribe to IPO shares through the PSE Electronic Allocation System (PSE EASy) web and mobile platforms.

With small investors dominating market trades in recent months, most activities have been focused on speculative stocks in the market, causing a lot of volatility.

But such high-volume speculative trades have also created new challenges as they clogged up online trading platforms, similar to an ongoing phenomenon in the US and other markets. The country’s leading online stock brokerage COL Financial, for the first time in recent history, recently suspended new client enrolment as the deluge in volume caught the brokerage house by surprise.

Since the mid-March lockdowns, about 10,000 new clients have been signing up with COL compared to just 3,000 per month previously. COL ended September last year with 404,000 client accounts from 332,000 at end-2019. INQ