Stock-investment fund

Now that the stock market is going through a hiccup arising from the subprime mess that hit hard at US banks, it is time for the Philippine Stock Exchange (PSE), together with the country’s two pension funds, to come up with a new version of the own-now-pay-later stock-loan program.

With just one percent of the population investing in the stock market—this is according to PSE stats—the stock-ownership scheme could achieve the long-sought financial literacy program the securities industry stakeholders wanted and which could translate into the doubling of the value turnover in the stock market.

All it takes is for both the Government Service Insurance System (GSIS) and the Social Security System (SSS) to pool their funds together for the sole purpose of democratizing ownership of shares of stock. The setting up of the stock-investment fund, from where interested GSIS and SSS members can borrow for stock purchases, could have the immediate effect of doubling the value turnover in the stock market since these future pensioners can immediately get the financial literacy that the PSE and other government agencies are trying to accomplish by way of owning shares of stock.

The GSIS and the SSS can come up with stringent measures to ensure that the SSS and GSIS members can buy only from a list of blue-chip stocks with a history of dividend payments and capital appreciation. This would not be difficult to ascertain as the PSE has its own research data. Even Yehey Finance can provide the needed data on the listed stocks that should be included in a so-called basket of stocks that could be eligible for the own-now-pay-later scheme.

In the late 1980s, the SSS launched its own Stock Investment Loan Program (SILP) which entitled SSS members to borrow up to P50,000 to buy a blue-chip stock precleared by the pension fund. The loan was payable over a period of five years and the collateral for the loan was the shares of stock the SSS members bought via the accredited stock brokers of the SSS. Theloan fund was later discontinued when the stock market went through a downward spiral.

For now, the stock-investment fund could be relaunched, bearing in mind, though, the mistakes of the past. All it takes is an information campaign to guide the future stock investors on the dynamics of the stock market. This financial-literacy program should be akin to the way the Bangko Sentral ng Pilipinas (BSP) went about its way in forcing the banking system to be transparent in their dealings with the investing public with respect to the unit- investment trust funds (UITFs).

The BSP issued several memorandums to the banking system to apprise the investors on the risks they face when they buy UITFs; one included the possibility of losing part of the capital or the investment put into the UITF. This same information thrust should be impressed upon the SSS and GSIS members who undertake to borrow from the proposed stock-investment fund for the sole purpose of buying shares of stock that have previously been precleared by the fund.

With this info campaign that could be undertaken by the PSE, in tandem with the government financial institutions, the desired objective of financial literacy that the government has been painstakingly trying to introduce for the overseas Filipino workers (OFWs) can have currency and a face as they can immediately equate what it takes to own a share of stock in a listed company on the stock exchange. The OFWs can also tap into this stock-investment fund of the GSIS and SSS that would initially start them on an “educational tour” of the stock market.

A distinct possibility is for the OFWs to borrow from the fund, purchase the stocks and then sit down while they try to digest what is in store for them. Once they get to receive the dividends from out of their stock ownership or see the communication from the listed companies by way of annual reports or even proxy solicitation forms, they can be educated enough to earmark some of their remittances for the purchase of additional stocks.

Again, the key here is a nationwide- info campaign just like that which the BSP introduced after a punishing UITF mess recently that had investors withdrawing their investments by the truckloads and putting in peril the banking system’s trust fund basket. What the PSE can do is to inform the future borrowers of the stock-investment fund on the dynamics of the stock market and that the key is to bet for the long haul, much like the legendary stock picker Warren Buffett, the world’s No. 2 richest man.

It is also very important for the PSE to disabuse the minds of the investing public on the perception that the stock market is much like the casino. It is this wrong perception that could possibly be at the heart of the problem on the difficulty that the securities industry stakeholders are experiencing when they try to reach other investors.

What the government could do is to harp on the benefits of owning a share of stock in a listed corporation. After all, historically, the stocks as an asset class have provided the best return ever since the era of the Depression. That is one verifiable fact that the PSE could highlight in making the pitch for the shares of stock when they launch another info campaign so that the one percent of the population now dabbling in the stock market could double overnight. 

E-mail: hugagni@yahoo.com

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