In its position paper filed at the House of Representatives, the PSE said the proposed measure would result in the withdrawal by the Government Service Insurance System (GSIS) and Social Security System (SSS) of all their investments in the stock market within one year from its enactment into law.
PSE president and chief executive officer Francis Lim warned that the mass withdrawal may lead to weakening of the national economy and erosion of investor confidence.
"Our efforts to help the local stock market catch up with its neighbors will go to waste, if we cannot stop these adverse proposals. Any substantial withdrawal of investment from the stock market, most especially by a government pension fund, would significantly reduce investor confidence in the country," Lim said.
Lim said the PSE might find it difficult to convince other investors, especially counterpart pension funds abroad, to entrust their money in local stocks, if the GSIS and SSS themselves are prohibited from investing in the stock market.
"We will be sending the wrong signals to institutional investors, if the bills are passed," Lim said.
The bulk of GSIS’s investments are in blue-chip stocks such as San Miguel Corp., Philippine Long Distance Telephone Co., Globe Telecom, Ayala Corp., Ayala Land, Manila Electric Co., Equitable-PCI Bank and Bank of the Philippine Islands.
The GSIS also has a 9.1 percent stake in the PSE, which is equivalent to 1.4 million shares worth P166 million.
The GSIS and the Social Security System are the biggest investors in the stock market with their holdings in various blue-chip issues.
Lim said data from 1990 to 2005 showed that the Philippine stock market remains at the tail end of selected Asian exchanges.
Lim said the PSE’s $7-billion value turnover in 2005 was the smallest among eight selected exchanges in Asia. The Jakarta Stock Exchange (JKSE), which ranked next to last, recorded $41.6 billion in value turnover also last year.
The same value turnover at the PSE fell by 1.3 percent from the year 2000 to 2005. In contrast, stock exchanges in Malaysia, Thailand, Singapore and Indonesia enjoyed double-digit growth in dollar value turnover during the same period.
Lim also noted that the PSE’s $39.8-billion market capitalization in 2005 was the smallest among the eight selected Asian stock exchanges. The Jakarta Stock Exchange (JKSE) had more than double that amount at $81.4 billion.
He likewise pointed out that the PSE recorded the slowest growth in market capitalization and has the smallest number of listed companies, totaling 237 as of end 2005. JKSE had 336 listed firms; the Stock Exchange of Thailand had 504 while Bursa Malaysia had 1,019.
Lim, however, said the PSE has been gaining some headway in reversing the trend. It noted, for instance, that local stock prices, as tracked by the PSEi year-on-year, enjoyed a double-digit growth in 2003 (41.6 percent), 2004 (26.4) and 2005 (14.9 percent).
Capitalization of locally listed firms also improved by 17.6 percent to $47 billion as May 2006.