10 stockbrokerage firms mull comeback in PSE

Encouraged by the upbeat mood in the equities market, at least 10 brokerage firms that had suspended operations in 2000 are eyeing a comeback in the securities market.

Philippine Association of Securities Brokers & Dealers Inc. (PASBDI) president Nestor S. Aguila said 10 brokerage houses that had ceased operations due to the financial crisis have signified their intention to revive operations but are likely to request for a much lower paid-up capitalization

Aguila said PASBDI, the umbrella organization of securities brokers and dealers, is now formalizing a letter requesting the Securities and Exchange Commission to reduce the minimum paid-up capital from P100 million to P30 million for brokers planning to resume operations.

Under the present SEC rules, new entrants are required a minimum paid-up capital of P100 million while existing brokers a paid-up capital of at least P50 million.

Aguila said the existing P100 million paid-up capital is too high and anti-Filipino since only foreign brokers and big Fillipino-owned broker firms can comply with the capitalization requirement.

"The main objective of this proposal is to allow the entry of more players in the capital market. The more, the better," Aguila said.

Aguila said some of these broker-firms’ plan to reactivate their seats to allow them to sell to other interested investors now that the market has been on an uptrend on improving corporate prospects.

Among the inactive broker firms listed in the PSE’s website include EBC Securiities, Highlands Securities Phils., Citicorp Securities International, JP Morgan Securities and KGI Securities Phils.

The SEC has imposed risk-based capital standards on stockbrokerage houses and investment houses to ensure they have adequate capital to cover risks and meet contractual obligations.

According to the SEC, a stockbroker firm’s access to sufficient capital enables it to protect its clients and counter parties from consequential losses.

The SEC believes that the adoption of the risk-based capital adequacy standards will encourage market intermediaries to adopt a more relevant approach to risk management. With the system in place, stockbroker-firms would have to assess their trading books more regularly in order to understand and monitor the risk profile of their respective businesses.

Last year, the Philippine Stock Exchange (PSE) was the second-best performer among its neighbor counterparts, with the Phisix rising 26.4 percent or 380.5 points at 1,822.83 from 1,442.37 in end-2003.

Analysts said the peso’s recovery coupled with an improved fiscal position has perked up the market. The peso has been gaining strength against the US dollar on the back of huge fund inflows amid an improving economic environment.

The improvement in government’s tax collection efforts has also contributed to the strength of the market. The Bureau of Internal Revenue, the government’s main tax-collecting agency, said it has exceeded its revenue target of P40.8 billion for January.

Another factor that has boosted investor sentiment is the decision of the California Public Employees’ Retirement System (CalPERS), the largest pension fund in the US with assets reaching $172 billion, to retain the Philippines on its list of permissible investment destinations.

The decision was made after CalPERS’s consultant Wilshire Associates gave the Philippines a passing score in its evaluation of the country’s political and economic situation.