THE Philippine Stock Exchange is considering raising the minimum proportion of listed companies’ freely traded shares to 12 percent from 10 percent to boost liquidity and attract investors, PSE President Hans Sicat said.
“Investors want issues that are more liquid,” Sicat said in an interview on Thursday. “Providing enough liquidity will help transparency in pricing of stocks.”
A date for the increase is being considered, he said.
The country’s stock market has been left behind by most of its peers in the region in terms of scale, product offerings and trading activity. With a market capitalization of $150 billion as of October 26, it’s the smallest of Southeast Asia’s five major markets, behind Singapore, Malaysia, Indonesia and Thailand. Japan is Asia’s largest market with a value of $3.61 trillion.
Philippine stock trading has averaged $128 million a day this year, trailing Malaysia’s $582 million, Indonesia’s $598 million and Thailand’s $992 million, according to data compiled by Bloomberg. An average of $1.24-billion shares were traded daily this year in Singapore, Southeast Asia’s biggest market.
The Philippine stock market’s lack of liquidity and weak corporate governance are “overriding themes” for the exchange, Sicat said.
“The stock market has still a lot of way to go if it’s to become a preferred destination for investments,” he said.
Sicat earlier said the PSE plans to introduce exchange-traded funds and securities lending to lure overseas investors. The exchange also extended trading hours by one hour to 1 p.m. this month, and will lengthen them again to 3:30 p.m. next year, with a 90-minute break at noon.
The PSE reinstated in January 2010 a rule requiring listed companies to keep at least 10 percent of their outstanding common shares as public float, or available for trading, a regulation it had revoked in 2005. Those that don’t meet the requirement were given until the end of November this year to boost their float.
Companies that don’t meet the deadline will be charged higher listing fees and given a year to comply or face being delisted, Sicat said.
Some companies such as San Miguel Corp., the largest food and drinks company, have sold shares to boost their float, while others have opted to voluntary delist, including Keppel Philippines Marine Inc., which will be removed from the exchange on Friday.
As of September, 43 to 44 of the 253 listed companies didn’t meet the minimum float, Sicat said.
Separately, the government and the private sector will come up with a minimum public-float requirement to be imposed on listed companies for the companies to continue to enjoy preferential tax rate on December 15.
BIR Commissioner Kim Henares told reporters on Thursday that based on their discussions with the PSE and Bankers Association of the Philippines, any agreement would take effect by January.
“As of now, we still stand by our position that the minimum [public] float should be at 10 percent as expressly stated on the PSE rules. We are invoking that since last year, and we are invoking that up to now,” Henares said.
Gains derive from publicly held stocks are levied with 1.5 percent, while gains derive from stocks not traded in the stock exchange are being slapped with 5-percent to 10-percent capital gains tax.
“Definitely, at present, we cannot go below 10-percent minimum float. It was them [PSE] who imposed that minimum float requirement and we are merely implementing it,” she said.
Meanwhile, Finance Secretary Cesar Purisima said the least the publicly listed companies can do is to comply with the minimum public float since the government is giving out tax incentives by only imposing 1.5- percent preferential tax rate on stock gains derived from listed companies.
“There are companies which even have less than a percent of their outstanding capital stock offered to the public. How can there be price discovery given that small public offering?” Purisima said on the sidelines of the Philippine Investment Summit for Global Fund Managers 2011.
