PH pushes for more IMF reforms
Emerging markets want bigger voice in Fund
THE PHILIPPINES and other emerging markets are clamoring for a bigger voice in the International Monetary Fund (IMF), given the
growing importance and influence of the developing world in the global economy.
The Intergovernmental Group of 24 on International Monetary Affairs and Development, otherwise known as the G-24, lamented the IMF’s failure to pass key reforms in the last three years that would have given emerging markets a bigger voice in the Fund.
“Larger quotas would provide greater representation and voice in the Fund,” the Philippines’ National Treasurer Rosalia de Leon told the INQUIRER. De Leon was the country’s representative to the G-24 meeting that took place at the sidelines of the IMF’s annual meeting last week.
De Leon said the IMF needs to recognize “the increasing contribution and growing importance [of emerging market nations] to the global economy.”
In a communiqué published at the weekend, the G-24 pointed out that the IMF missed its self-imposed Oct. 2012 deadline for the implementation of new quotas for countries and other governance reforms, which were agreed upon in 2010.
The G-24 added that the IMF
THE MARKET made another weekly advance of 99.32 points or 1.55 percent as the PSEi settled at 6,489.80 last Friday.
However, even if the market’s weekly advance was much better in the second week of October than the 10.67point or 0.17-percent gain made in the first week, daily trading activities continued to close near sessions’ lows, indicative of investors’ inclination to sell before the close of trading sessions to play it safe and preserve profits or minimize risks exposure.
Considering the market’s present condition, total weekly value turnover fell to P46.83 billion against P66.94 billion of the previous week.
Along with the decline in overall weekly value turnover, foreign transactions also dropped. Total foreign selling transactions for the week amounted to only P31.85 billion as compared to the previous week’s transaction of P49.95 billion.
As this happened, foreign buying transactions increased. It amounted to P28.94 billion, up P7 billion from the P21.94 billion recorded the week before.
Despite this new development, however, foreign selling transactions continued to dominate overall foreign trading transactions last week.
Except for the services sector which suffered a weekly loss of 74.66 points or 3.64 percent, all major sectors advanced.
At the forefront was the holding firms sector with a total weekly advance of 168.39 points or 2.96 percent and the property sector with a total weekly gain of 116.14 points or 4.75 percent. They are followed by the industrial and financial sectors with total weekly gains of 77.86 points or 0.84 percent and 18.27 points or 1.16 percent, respectively.
Lending further support was the mining and oil sector with its total weekly gain of 143.46 points or 1.17 percent.
Newproduct
A new product to augment trading transactions is soon to make its debut on the bourse. Last Friday, the PSE conducted its last seminar on Exchange Traded Funds (ETFs).
ETFs are normally open-end investment companies that “track an index or basket of assets.” And, like a stock that is traded on the exchange, “ETFs undergo price changes throughout the day as they are bought and sold.”
The planned ETF product will be a security that will track the progress of our local market’s benchmark index, the Philippine Stock Exchange index or PSEi. It will be traded like any listed shares or securities on the bourse.
There is one index fund that tracks the PSEi at the moment. This is the MCSI Philippines Index (MSCI Philippines) of MSCI Inc., which is composed of 18 of the largest and most actively traded stocks in the PSE today. As reported, “the index covers about 85 percent of the Philippines equity universe.”
MSCI Inc. also has several index funds tracking markets that include our region. These are the MSCI Emerging Markets Index (launched on Dec. 31, 1987) and the MSCI ACWI Investible Market Index (launched on May 31, 2007).
The MSCI Emerging Markets “originally covered 10 countries representing less than 1 percent of worldmarket cap. As of late, the index covers over 800 securities across 21 countries representing approximately 13 percent of worldmarket cap.”
The MSCI ACWI IMI “captures large, mid and small cap securities across 24 Developed Markets (DM) and 21 Emerging Markets (EM) countries. It consists of 8,405 constituents representing approximately 99 percent of the global equity investment opportunity set.”
Under “DM or developed markets” are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and theUS.”
The “EM or emerging markets” include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.”
Based on latest developments, “Greece will join the EM Index and Morocco will leave the EM Index for the Frontier Markets Index.”
Actually, MSCI has the two best known global stock market indices for markets outside theUnited States. One of which is the MSCI Eafe index, which “tracks the performance of about two dozen developed countries in Europe, Australasia and the Far East. The index is widely used as a benchmark for the total international stock market.”
MSCI Inc. was a spin-off company of Morgan Stanley and is a publicly traded company at the New York Stock Exchange. Today, it is no longer a part of Morgan Stanley following a complete divestment in 2009.
Among the overriding reasons for an ETF as a desirable investment is that “investors can diversify their investments in stocks with minimal capital outlay, allowing smaller retail investors to have access to blue chip companies.”
“Investors, especially those who do not have enough time to monitor the stock market can enjoy the returns of the overall market without having to actively manage their portfolio.”
Following the market’s chart, the PSEi in the last four years grew by “194.4 percent for a compounded annual growth rate of 31 percent.” This means an ETF of the PSEi would have yielded as much returns in the past four years.
Under the SEC-approved ETF rules, the current trading participants of the bourse can be designated as “authorized participants” (APs). Any qualified AP can act also as “market maker” of the ETF.
The allowable minimum investment requirement for ETFs could be as low as P5,000. Just like stocks, ETFs may distribute dividends, too.
Drilling status at Galoc
The drilling program (Phase II) to enhance the Galoc oil field is said to be proceeding as scheduled. As planned, the development wells of “Galoc-5H and Galoc-6H were targeted be drilled to a total vertical depth of 2,190 meters with a 1,777 meters of horizontal completion in the G-5H well and 1,389meters of horizontal completion in the G6H. Drilling is expected to take approximately 115 days including the flowing of thew ells for clean-up.”
If the development operation will not face any hitch in the following days, “first oil from the Phase II wells is expected in November.”
Bottom line spin
While themarket was on the upside in the last two weeks, its apparent nature appears to be still far from bullish. As mentioned earlier, prices had been on the advance, indicative of the likelihood that investors now find the current level of stock prices already attractive. However, since trading had always been ended at sessions’ lows, investors remain reluctant to hold long positions resulting in committing more money into themarket. Ongoing world market problems—including what is bugging the US market now—appear to the obvious reasons for the market’s current character. This will continue until solutions to the said problems are in place.
(The writer is a licensed stockbroker of Eagle Equities, Inc.. You may reach the Market Rider at marketrider@inquirer.com.ph, densomera@msn.com or at www.kapitaltek.com