More small investors turn to stocks to make money

Retail investors have become a force to contend with in the local stock market, making up for the slack in foreign investor interest during the prolonged coronavirus (COVID-19) pandemic.

Based on preliminary data from the Philippine Stock Exchange (PSE), retail investors accounted for more than 45 percent of market turnover in the first quarter of the year. This represented a much bigger chunk of trades compared to their share of 26.9 percent in 2020 and 18.2 percent in 2019.

“Despite the increase in net foreign selling our market experienced record turnover for the first quarter as local investors increased their share in the trading volume to 74.3 percent from last year’s 54.6 percent,” PSE president Ramon Monzon said in a press statement.

Digital trading

But even excluding institutional investors, the expansion in the market share of retail investors to 45 percent was enabled by digital trading platforms. The pandemic lockdowns have also driven cash-awash local small investors to chase yields in the local stock market as interest rates hit record lows.

Meanwhile, foreign investors continued to exit the local market as net foreign selling for the first quarter reached P47.91 billion, up by 55.1 percent from a year ago.

Capital raised at the PSE for both primary and secondary offer shares in the first quarter rose to P41.63 billion from P19.24 billion in the same period last year. Capital-raising activities for the first three months of the year included one initial public offering (IPO), one follow-on offering, two stock rights offerings and two private placements.

New rules

“The approval of our amended listing rules should help accelerate IPO listings at the exchange, especially in the SME (small, medium and emerging) board with the relaxed requirements and the adoption of a sponsor model for listing,” Monzon said. “When approved, our proposed rules on preferred shares-only listing and proposed revisions to the backdoor listing rules should also encourage more listings at the PSE.”

Average daily value turnover in the first three months of 2021 went up by 64.6 percent year-on-year to P10.99 billion from P6.68 billion.

The main stock barometer PSE Index ended the first quarter at 6,443.09, declining by 9.8 percent especially with the resurgence of COVID-19 cases in March.

“Uncertainty about the pace of the country’s vaccination program has discouraged foreign investors. But we expect that once a good percentage of the population has been vaccinated, these investors will soon regain confidence in our economy,” Monzon explained. INQ