PSE finalizes 3-yr plan for listing of own shares

The Philippine Stock Exchange (PSE) is finalizing a three-year business plan which will include the proposed listing of its shares in compliance with the Securities Regulation Code (SRC).

In a recent caucus on the plans of the PSE to go public, shareholders of the exchange agreed to initially list the bourse’s shares via introduction or by directly listing and allowing trades on PSE shares without first undertaking an initial public offering (IPO).

Shareholders of the demutualized PSE said they prefer the introductory listing of the whole exchange rather than spinning off its clearing and settlement units and real estate assets.

The PSE has three subsidiaries – Securities Clearing Corp. of the Philippines, Philippine Central Depository and Philippine Stock Exchange Foundation Inc. – and some property assets.

The SRC requires the PSE to go public by the end of the year with the aim of diluting the broker-shareholders’ interest in the exchange to a maximum of 20 percent of outstanding capital.

The Securities and Exchange Commission (SEC) has warned that failure to comply with this requirement will force the corporate watchdog agency to choose or appoint the PSE directors next year instead of holding an election.

PSE president Ernest Leung, however, said the exchange will have to first boost its earnings to attract investors as he notes that most of the bourse’s income last year came from money market placements and not from listing operations due to the anemic conditions of the equities market.

Leung said no interested buyers of PSE shares might surface if the bourse rushes into going public this year as it has yet to be profitable and efficient enough to attract the attention of the market.

In preparation for its own public listing, the PSE is exploring possible alliances with other exchanges overseas to enhance its trading system and to make its shares attractive to investors. The PSE is hoping to forge alliances with exchanges in Malaysia, Thailand and Indonesia.

The PSE is also looking at developing and acquiring information technology products such as online trading systems, clearing payment and depository systems, compliance and surveillance systems, and technical analysis software and data services.

The International Finance Corp. has also signified interest to invest in the PSE although no formal agreement has yet been reached.

The PSE is also considering tapping other developed exchanges such as those in London and New York Stock as possible strategic investors.

As required under the SRC, the PSE has been demutualized through its conversion into a revenue-generating shareholders-owned corporation and has achieved the goal of having more than one-half of its board of directors as independent, non-broker directors.

Consultants of the PSE said that should PSE seek to list itself, investors are likely to value its shares on an earnings basis. Usually, companies are listed around 10 to 15 times their price earnings ratio. In this regard, the PSE said it should build up its earnings to acceptable levels to ensure better valuation of its shares.

In the meantime, the exchange is focusing its efforts on further professionalizing the exchange and enhancing its revenue sources. The PSE is planning to increase annual maintenance fees as services provided to listed companies are enhanced. Maintenance fees at the exchange are at the lower end compared to that of the other region’s.

The exchange has also lined up new products to give investors more choices on where to invest their money. Following the launching of the dollar-denominated trading board, the PSE will soon allow the listing of Treasury Bills.

Other products in the pipeline are the exchange traded funds and the real estate investment trust.