Most Filipinos must have missed out on a windfall from the Philippine stock market last week, with data showing foreign investors accounting for the bulk of trade when the benchmark index was breaking records and setting new highs during the last two trading days.
On Friday, the market barometer, the Philippine Stock Exchange index (PSEi) — closed up 0.44 percent at 8,180.85 points. That was a carryover of momentum from Thursday’s rally that drove the index up to finish at 8,144.91, breaching the previous high of 8,127.48 hit on April 10, 2015.
“Market sentiment continues to be positive, buoyed by the favorable outlook of analysts on the overall market,” said PSE President and CEO Ramon Monzon in a statement issued by the exchange on Friday. “This optimism was again validated, with the market closing today at yet another record high and with trading value exceeding P11 billion,” Monzon said.
Foreign investors bought P7.262 billion worth of shares on Friday. Before the end of that day, however, foreign investors also sold P6.788 billion, taking their profits out of the Philippine market and sending them back to their home countries.
Foreign transactions alone on Friday totaled P14.05 billion, including what the exchange calls dollar-denominated securities transactions, which are on top of the daily turnover volume and value. Thus, it is not unusual to see turnover numbers showing foreign transactions exceeding the total trading turnover for the day.
That explains why on Friday, foreign transactions worth P14.05 billion exceeded the total value turnover of P11 billion. And that kind of situation has been happening daily of late, based on PSE records.
But more importantly, what this portrays is a local stock market dominated by foreign investors buying and selling listed Philippine shares and making a killing on our own stock market, with only a fraction of the daily volume of trade accounted for by local investors.
In January to August this year, foreign funds invested $10.69 billion in Philippine securities, including stocks and bonds and time deposits, according to data released by the Bangko Sentral ng Pilipinas last week. At the same time, these foreign funds withdrew and repatriated at least P11 billion of their portfolio investments back home.
About 80 percent of foreign portfolio investments are placed in the local stock market. The returns are being transferred back to the United Kingdom, the United States, Luxembourg, Malaysia, and Hong Kong—the top five investor countries, with a combined share of 77.7 percent of the total foreign portfolio investment. The US is the main destination of money transfers, receiving 79.9 percent of total remittances from the Philippines.
It can be argued that in the eight months to August, foreign portfolio investors made a cool $318.88 million by taking a risk and placing their money in Philippine equities.
Many retail Filipino investors would rather buy lotto tickets worth P120 each day for a year, which sum up to P43,680 in 364 days. Sadly, they hardly win back a fraction of the total amount of bets. The odds of winning the 6/42 lotto game by picking six numbers from 1 to 42 is supposedly 1 in 5,245,786.
The difference between buying lotto tickets in the hope of hitting the jackpot prize, and placing your money in the stock market is simple. Lotto is a game of chance, while the stock market is a game of wits.
Foreign investors don’t pick a stock on the PSE by spinning a wheel of fortune. Most of them, especially the professionals, study the fundamentals of both the economy at large and the earnings potential of companies listed on the market.
It’s a complicated game but the foreign players are making a killing to the tune of $11 billion—gross—in a matter of eight months. It’s a pity many Filipinos seem to be missing out on the windfall from our financial markets, especially when they can easily access 162 stock brokerage firms that would gladly entertain their questions and accept a minimum placement of P5,000 or engage the PSE and learn the ropes of making money from the market as short-term or long-term investors, instead of letting most of the green shoots ripen for foreign investors to pick.
This is not exactly a misfortune but missed opportunities such as this are like sweet, juicy apples falling on the ground where people with hungry, dry, open mouths are lying fast asleep.