First Metro plans another ETF in early 2017
FIRST METRO Investment Corp. (FMIC) is launching another exchangetraded fund (ETF) and a follow-on offering amounting to P1 billion for the existing one in early 2017, as the product gains ground in the Philippines.
“Hopefully, First Metro will be able to issue other ETFs, which we are going to do in the early part of next year,” its Chairman Francisco C. Sebastian said during a media briefing in Makati City on Monday for the ETF Awareness Week.
FMIC can launch the product — a fund that invests in a basket of securities and then trades like a common stock on the equities bourse — within the first quarter of next year, Mr. Sebastian noted.
The investment bank, through First Metro Asset Management, Inc., manages the first and lone ETF listed on the Philippine Stock Exchange (PSE) to date: First Metro Philippine Equity Exchange Traded Fund, Inc. (FMETF).
The fund, incorporated in January 2013, invests in and tracks the 30 companies comprising the PSE index. Its portfolio is rebalanced and reconstituted every six months to reflect the composition of the local stock barometer.
“We are doing a follow- on offer of at least P1 billion for additional ETF [shares] to be offered to retail and institutional investors so that we can increase the liquidity of this particular instrument in the stock market,” Mr. Sebastian said.
The follow-on offering will consist of around 10 million shares, adding to the 7,350,000 shares currently in issue. It will almost double the fund’s market capitalization that amounted to P838.6 million after the stock’s price closed P1.60 or 1.4% lower at P112.50 apiece on Monday.
“The follow-on will probably be finalized within the next four weeks and probably early next year will be a good time to do it,” Mr. Sebastian said.
“We’re also watching the index. We’ve seen the index at 8,100 — I mean, we will time it so that it’s probably — at least below 7,000 will be a good time to get into the market for a long-term play,” the company official added.
The planned ETF listing and follow-on offering are expected to drive interest among local investors toward the relatively new financial instrument.
The ETF category has emerged as the fastest- growing asset class globally, recording a compounded annual growth rate of 25% over the past 10 years, PSE President and Chief Executive Officer Hans B. Sicat said during the media briefing.
“It tells you what we have here in the Philippines is really just the start and with more education and more familiarity that probably should increase in terms of not just absolute size but hopefully as proportion,” Mr. Sicat noted.
On its third year of operation now, FMETF should have supposedly served a test case for the viability of such offerings in the local market.
“Given the ease of understanding the product as well as the wide acceptance globally, what we do hope now is that now that we have a basis with this start of this three-year track record of the First Metro ETF is to actually expand this ETF product suite into other products,” Mr. Sicat said.
“From the PSE standpoint, we do believe that increasing the number of products and services, in particular in the ETF space, will also help us in terms of bringing in a much faster growth of our retail investor space.”
For the new fund, FMIC will tap a global partner to provide the index for the selection of local stocks, FAMI President August M. Cosio, Jr. said during the briefing.
Prospective investors should focus on the intact fundamentals of the local market over the externally driven volatility that further dragged the PSEI by 110.33 points or 1.60% to 6,776.41 on Monday and will probably keep the gauge around the 6,800 mark, Mr. Cosio noted.
“When we launched the ETF in December 2013, the index went down that particular week. We launched at P100 [per share], it went down to P94 but now it’s at P113,” the FAMI executive said.
“So, what I’m trying to say is it doesn’t matter where the index is going; we all know that over the long run it just keeps going higher simply because our economy is growing and fundamentals are improving.”