PSE moving to woo China investors
THE PHILIPPINE STOCK EXCHANGE (PSE) is wooing the Shenzhen Stock Exchange to secure a minority interest in the local bourse — a move that is seen increasing investments from China amid warmer ties between the two countries.
PSE President and Chief Executive Officer Ramon S. Monzon told reporters on Monday that the bourse is in the “very preliminary” stage of discussions with the Shenzhen Stock Exchange for an equity investment in the local exchange.
“I’m trying to convince them to subscribe to our follow-on offering. I’d like them to be a shareholder, but that’s all talk pa lang,” Mr. Monzon said at the sidelines of the Shareholders Association of the Philippines general membership meeting in Makati City.
The PSE plans to undertake a follow- on offering and stock rights issue to reduce broker ownership to 20%. Brokers currently own a 27.9% stake in the PSE.
“Of course, they are also limited by ( Securities Regulation Code) to ( own) not more than five percent of the exchange,” Mr. Monzon added, referring to a provision in the SRC stating that “no person may beneficially own or control, directly or indirectly, more than five percent of the voting rights of the exchange.”
The acquisition of a stake in the PSE may set the stage for the establishment of a ManilaShenzhen trading link that will give Chinese investors access to shares listed in the Philippines and vice versa.
“The reason we want to tie up with the Shenzhen Stock Exchange is because both Shenzhen and Shanghai have what they call a Shanghai- Shenzhen Connect with Hong Kong. With a ShenzhenManila Connect, Chinese investors (will) have the ability to invest in the market,” Mr. Monzon explained.
RIDING ON IMPROVED TIES
The partnership is happening at a time when the country’s relationship with Beijing is improving under the administration of President Rodrigo R. Duterte.
The plan to connect with the Chinese bourse is also seen boosting volumes in the local capital market, with the PSE logging in an average daily value turnover of $128.28 million — the lowest among six major Southeast Asian countries.
“I’m not too optimistic the other way. I don’t think our investors are ready to invest in the foreign market,” Mr. Monzon said.
“But China, being very liquid, will readily invest in Philippine market.”
A Manila- Shenzhen trading link may also be the precursor for a broader partnership between Southeast Asian and Shenzhen markets. “This would be a breakthrough for regional capital markets integration, placing the Philippines on the path of big league equities trading,” an equity analyst said.
The PSE is working on sealing a “more concrete partnership” with the Shenzhen Stock Exchange after signing a mutual cooperation agreement in 2009.
The actual linkage may “take some time” to complete because both parties have to iron out some issues, including settlement. “The (Bangko Sentral ng Pilipinas) gets involved. Settlement stays in one country… so we have to find a way to work on a country-to-country basis,” Mr. Monzon explained.
The announcement came in the wake of news last week that the ASEAN Trading Link that had started five years ago with the Malaysian, Singapore and Thai bourses — and with Indonesian, Philippine and Vietnam markets lined up for eventual inclusion — stopped operation on Oct. 6. —