[OPINION] PSE hierarchy blamed for the market’s continued tepid performance 

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Blame on the continued tepid performance of the market since the start of the year has shifted to the Philippine Stock Exchange (PSE) hierarchy, starting from its president and chief executive officer, Ramon S. Monzon.  

The leadership is criticized for oversights and shortcomings on its developmental role to expand and grow the market. This is beside the continuing dissatisfaction on the leadership’s apparent ineffectiveness in its regulatory duty. The most prominent of which is the controversial sale of unregistered shares of Abra Mining (AR) to the investing public.  

The Abra Mining controversy involved the illegal issuances of AR shares for five long years — from 2015 to 2019 — totaling 169.05 billion shares, far exceeding the company’s authorized shares.  

After concluding its investigation, “the PSE has since then remained tight-lipped about its findings.” The matter became even more a puzzle with “the PSE passing on the responsibility to the Securities and Exchange Commission (SEC), which has similarly avoided addressing the issue.” This left the PSE to consequently lose its credibility to maintain integrity and transparency in regulating the market. 

Now, the PSE is blamed for the market’s dire predicament. When the market closed last January 17 at the end of the third week of trading for 2025, it has slipped into negative territory by no less than 2.71% or 176.67 points at 6,352.12. Discontent is expected to intensify as the market’s tepid performance goes on.

Performance review

Proud of being considered as one of the oldest bourses in Asia, the PSE was named the “Best Stock Exchange in Southeast Asia for 2021.” The award was conferred by Alpha Southeast Asia, whose claim to fame was its record as the first investment magazine established to focus on Southeast Asia since 2007, which was seemingly clueless of the Abra Mining scandal at the time. The anomalous trading “included foreigners to buy AR shares from January to February 2021 when Abra Mining accounted for more than 70 percent of daily transactions.”

It was not exactly the market’s best and perfect year. The PSEi closed at the time at 7,122.63, down 0.24% year-on-year (YOY). Nevertheless, total market capitalization was up 13.8% at P18.1 trillion and average daily value traded was P9.0 billion, up 22.5%. This happened regardless of the net selling activity of foreign investors whose total value turnover, on the other hand, was considerably low at 36.05% only of total market transactions. 

The market was lifted by the following counters: the services sector, up 31.2%; the financials sector, up 11.0%; industrials sector, up 10.8%; and the mining & oils sector, up 0.8%. The holding firms and property sectors weighed down the market when their performances slipped 7.4% and 12.1%, respectively. 

There were eight new companies listed at the time, namely: DDMP REIT Inc. (DDMPR); Monde Nissin Corporation (MONDE); Filinvest REIT Corp. (FILRT); RL Commercial REIT Inc. (RCR); MREIT Inc. (MREIT); AllDay Mart Inc. (ALLDY); Medlines Distributors Incorporated (MEDIC); and SP New Energy Corporation (SPNEC).  

Total capital raised (funding raised from primary shares only) was estimated at almost P160.0 billion.  There were 276 listed companies and 125 active trading participants.

The president and CEO at the time was no other than the current president and CEO of the bourse, Ramon S. Monzon.

Ensuing years to the present

In 2022, the PSE came out with additional market-making initiatives. It revised its listing rules and rolled out the “web-based platform called PSE EASy (Electronic Allocation System) that will enable local small investors (LSI) to subscribe to shares online whenever there is an Initial Public Offering (IPO).” The LSI program required companies conducting an IPO to allocate ten percent (10%) of their offering to local investors. But local investors can only subscribe to not more than P100,000.

The PSE tightened the “Backdoor Listing Rules” and likewise amended the “Lock-Up” requirements. It also permanently closed the trading floor.  

Unfortunately, total market capitalization dropped to P16.56 trillion, down 8.4%, even if the number of listed companies grew to 286, but with only 124 actively trading participants.

Ten (10) new companies were listed at the time, namely: Haus Talk Inc. (HTI); Figaro Coffee Group Inc. (FCG); Citicore Energy REIT Corp. (CREIT); Bank of Commerce (BNCOM); CTS Global Equity Inc. (CTS); Raslag Corp. (ASLAG); VistaREIT Inc. (VREIT); Balai NI Fruitas Inc. (BALAI); LFM Properties corporation (LPC); and Premiere Power REIT Corporation (PREIT).

Noticeably, foreign transactions leaped to 40.76% of total market value turnover. However, 51.98% of which were selling transactions that foreign investors ended as net sellers.

Partly because of the foregoing development, the market closed at 6,566.39, down 7.8% for the year.  

At the end of 2023, the PSEi slipped further to 6,450.04, down 1.8%, while average daily value turnover dropped by 16.5% to P6.09 Billion. Nonetheless, total market capitalization slightly rose to P16.74 trillion, up 1.1%. The financial and services sectors powered the market from falling down lower.  

Total capital raised was P141.0 trillion, up 42.0%, with the listing of three new additional companies, namely: Alterenergy Holdings Corporation (ALTER); Upson International Corp. (UPSON); and Repower Energy Development Corporation (REDC). However, the market ended the year with 283 listed companies and 124 actively trading participants.  

Foreign investors remained net sellers for the third year while their overall transactions rose further to 43.91% of total market transactions.  

Last year, 2024, the market was on better grounds. It was up 1.22% as it closed at 6,528.79. Total market capitalization rose to P20.01 trillion, up 19.5%, while average daily value transaction also slightly rose by 0.1% to P6.10 billion. It was the financial, industrial and services sectors that lifted the market.  

Total capital raised was down by 46.2% to P75.78 billion. Foreign investors ended as net sellers for the fourth year but their overall transactions rose higher to 46.22% of total market transactions.  

Of note, the PSE implemented the volume-weighted average price (VWAP) — VWAP trading — which is a technical analysis tool to help traders and investors make decisions about buying or selling a stock; launched PSE EASy Phase 2 with integrated electronic payment system; and hosted the first on-site Road to IPO forum for potential listing applicants. This resulted in the further listing of three new companies, namely: the OceanaGold (Philippines) Inc. (OGP), Citicore Renewable Energy Corporation (CREC), and NexGen Energy Corp. (XG). 

Needless to say, the PSE hierarchy has not been sleeping on the job to promote the growth and development of the market. It has been working hard and diligently since it received that prestigious award in 2021.  

However, it is also undeniable that market transaction is shrinking. Average daily value turnover has decreased by 32.0%, as it has gone down to P6.10 billion from P9.0 Billion since 2021. Likewise, foreign investors have always been net sellers, that they are not reliable accounts for growing the market. Their sway in influencing the direction of the market has increased as their trading activities had risen to 46.22% (or even higher at times) of total market transactions. Above all, the number of local stock investment accounts have not grown. 

The PSE is said to be simply wrong in how it has been doing its job, especially in handling public offerings. It has lost sight of its real role in the paradigm of public offerings, particularly in the selection, scheduling, and pricing of stock issues.

To start with, the PSE has not given enough effort in the listing of small cap companies, that the small board has not grown all these years. It has not been also successful in attracting family-owned and -controlled companies, among others, who are ripe targets to benefit from listing publicly at the same time allowing the investing public a chance to have a piece of their profitable operation.    

The bourse has been also acting like the underwriters and issuers. Public offerings are scheduled one at a time in order to ensure market monopoly and success as if this is its main concern, which is essentially to give investors the opportunity to have as many public offerings as possible to choose from at any time. It should leave the underwriters and issuers in worrying about the scheduling and timing of their own public offerings.

Next, the bourse has been pliant in the pricing of stock issues in favor of the interest of underwriters and issuers, instead of ferreting a good offering price for the investing public. Recall that a majority of the stock offerings over the last five years are now trading below their original initial public offering prices. This is because the offering prices are maxed out.

Lastly, the PSE should increase the percentage of allocation for LSIs as one form of increasing the number of investors and investing accounts. Imagine, the number of trading accounts in the market have been overtaken by a mile, so to speak, by those trading in cryptocurrency, which is notoriously volatile and riskier than stocks. – Rappler.com

(The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise.  Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity.   You may reach the writer at densomera@yahoo.com)