GMA asks private sector to help lure back stock market investors

Following the legislation of key economic bills, President Arroyo has called on the private sector to do its share in luring back foreign and local investors into the stockmarket.

This was brought up by President Arroyo in a meeting she had with Philippine Stock Exchange (PSE) led by its chairman Alicia Arroyo and its president CayetanoPaderanga, and Securities and Exchange Commission (SEC) chair Lilia R. Bautista. PSE officials sought the meeting to personally thank President Arroyo for the recent enactment of R.A. 9243 exempting stock transactions from the payment of documentary stamp tax.

The measure will reduce transaction costs and is expected to boost liquidity in the market.

Bautista said President Arroyo underscored the need for the private sector to come up with its program to improve the stockmarket now that the government has delivered the necessary legislations on DST and securitization.

Among the salient points of the Securitization Act include the removal of taxes, rationalization of the regulatory system and the creation of Special Purpose Vehicle as the transferee of assets and the issuer of securities.

The Securitization Act is intended to raise domestic savings that will finance investment growth. It will also expand available long-term credit for housing, infrastructure and other development priorities for the country.

Bautista said President Arroyo has urged the PSE and SEC to broaden their educational campaign to further encourage investors to take up equity investments besides savings in banks or being lured by pyramiding scams.

Bautista said the President believes that "Practically every family has an OFW with disposable income that do not know where to invest."

The SEC chief said a two-pronged promotional program to attack both the "supply" and "demand" side of the market was discussed. This includes attracting more listing of government and private firms and encouraging participation by domestic investors to include Overseas Filipino Workers.

Bautista said the PSE will approach big unlisted domestic companies to list in the exchange under the more liberal, revised listing rules. Entities registered with the Board of Investments and those borrowing money from government financial institutions such as the Development Bank of the Philippines will also be encouraged to offer their shares to the public.

The SEC has previously approached by the BOI on the matter but the latter had some reservations on mandating listing of all registered enterprises. Nevertheless, Bautista has committed to follow up their request with Trade and Industry Secretary Cesar V. Purisima.

In particular, the SEC had asked the BOI to draft the criteria for listing to encourage BOI-registered entities to offer their shares to the public. The corporate watchdog agency said the BOI could work within the guidelines of the PSE, which set a minimum capital requirement for listing.

Despite the mandatory listing requirements for energy companies as well as those that have availed of fiscal incentives from the BOI, they were able to delay their listing, citing poor market conditions.

The weak economic environment and the uncertainties in the political front have made it even more difficult to attract investors into the stockmarket. Persisting coup rumors have added another layer of gloom too.

Once dubbed as a get-rich-quick investment option, an IPO is a means of raising funds for expansion and capital, employed by companies as a cheaper alternative to the more expensive debt instruments such as bonds and bank loans.

It is done by selling a potion of the company’s shares of stock at a price based on its book value or on its projected earnings for the year. These shares are then listed with the PSE so that stockholders and investors may trade the issue.

Of the 237 firms listed in the exchange, only 100 are actively traded.