|
By Likha C. Cuevas-Miel, Assistant Business
Editor
THE biggest pension fund in the US said it has not pulled out its
investments in the Philippines
despite uncertainties in emerging markets after the fall of Lehman
Brothers a year ago.
In an e-mail, the California Public Employees’
Retirement System (CalPERS)—which has about $901.4 billion in
investments worldwide—said that as of June 20 this year, its
placements in companies listed in the Philippine Stock Exchange (PSE)
dipped almost 33 percent to around $36 million from $53.7 million
the same period a year ago.
“The difference may be due to stock value
declines and not necessarily to selling of shares by the six
external managers who deploy CalPERS capital to emerging market
countries,” the pension fund told The Manila Times.
But a year ago, it was not the case with foreign
investors. After esteemed names like Lehman, Merrill Lynch and
American International Group (AIG) fell on their knees or altogether
bowed out from Wall Street, investors pushed the panic button and
pulled back their money to halt the bleeding.
As funds fled on worries that the world is on
the brink of a global recession, the PSE suffered its worst fall in
a single day on October 27 when the composite index—the benchmark
of share price movements of listed firms—plunged by 12.3 percent,
or 239.66 points to 1,713.83, marking the biggest drop since the
Asian financial crisis of 1997. Trading was halted for 15 minutes to
prevent the PSEi from sliding further.
During the months that followed, foreigners
continued to dump shares of local companies, more than half of the
amount they were buying a year ago as risk aversion lingered. On
November 27, 2008, net foreign selling amounted to P39.1 billion, a
reversal from the net foreign buying of P62.97 billion exactly the
year before.
As the financial markets stabilized this year,
funds began to creep back to emerging markets. Data from the Bangko
Sentral ng Pilipinas (BSP) showed that foreign investments in listed
shares of local firms and in other peso-denominated financial assets
recovered in the first half of this year but the June figures showed
no sustainable trend as far as inflows are concerned.
Foreign portfolio investment (FPI) registered a
net inflow of $199 million, turning around from the—$636 million
in the same six-month period last year. About 75 percent of total
inflows went into PSE-listed shares but this was 32 percent lower
than the $3.4 billion of last year. At least half of the stock
placements went to telecom and consumer goods companies.
The central bank said investors—mostly from
the US, UK, Japan, Singapore and the Netherlands—continued to be
affected by risk aversion with some domestic concerns including
declines in Philippine exports and the country’s difficult fiscal
position.
At end-August, the BSP said that “encouraging
domestic macroeconomic fundamentals such as declining inflation,
easing interest rates and robust remittances by overseas
Filipinos” have enticed foreign fund managers to place their bets
in local securities. FPI in the first eight months yielded a net
inflow of $182 million, a reversal from the net outflow of $446
million in the same period last year.
Now that the financial system may be on the
mend, foreign institutional investors like CalPERS are now
positioning for economic recovery.
In an interview over the talk show Insight, Joe
Dear, CalPERS’ chief investment officer, said, “After the events
of 2008 an extraordinary reduction in values for equities, we looked
at the long term return assumption and basically said we don’t see
a significant reason to change. That is we didn’t reduce the
expected returns significantly, some minor adjustments. That’s a
very powerful statement about our belief in the future.”
In response to the financial meltdown that
ensued after the collapse of two key US mortgage companies, CalPERS
said it has developed five financial regulation principles aimed at
restoring trust and confidence in the global capital markets.
The key elements of the principles are greater
disclosure and transparency, true regulatory independence and an
increased and effective shareowner voice in the capital markets.
They also include earlier identification by regulators of issues
that give rise to overall market risk that threaten global markets,
and the preservation of institutional investors’ freedom to invest
in the full range of investment opportunities.
Before investing, CalPERS managers will assess
country and company prospects in terms of political stability and
the development of democratic institutions and principles;
transparency of information, including elements of a free press;
harmful labor practices, including the use of child labor; corporate
social responsibility; adequate market regulation and liquidity;
commitment to free market policies and openness to foreign
investors; reasonable trading, settlement proficiency and reasonable
transaction costs; and appropriate disclosure on environmental,
social, and corporate governance issues.
In 2004, CalPERs almost pulled out its
$67-million investment in the Philippines as the country’s score
of 1.87 points didn’t qualify Manila in the list of “permissible
emerging markets,” which has a threshold of 2.0 points.
It later decided to retain the country in
the list after the government was given a two-month grace period to
justify its retention.
In 2006, CalPERS raised its rating of the
Philippines, placing it above China, India, Indonesia, Malaysia and
Thailand in terms of the countries in which it invests.
|
