Mac Murray

Philippine Stock Market

(Total Reading Time:  5 Minutes)

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If you’ve ever spent time at an open air marketplace–such as a Middle Eastern flea market, a Midwest American farmer’s market, or palengke sa Philippines–you already have a good idea of how a stock market works.

In fact, if you grew up in such an environment, you may already have more instinctive knowledge about stock markets than most Westerners.

Just as animals, produce, and handicrafts are bought, sold, and bartered in an outdoor market, ownership interests in businesses–known as “shares of stock”–are bought, sold, and bartered in a stock market.

MARKETPLACE 1

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In much the same way prices of various items in an outdoor market go up or down  depending on the season, harvests, supply & demand, etc., prices of stocks go up or down depending on how numbers of investors feel about the prices of the stocks or the businesses they represent.

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How You Earn As an Investor

Anyone who owns stocks is regarded as a part owner of the firm–a stockholder.  Being a stockholder–also known as a shareholder–enables you profit in two different ways:

First, being a part-owner of the firm entitles you to a piece of the firm’s profits.  When a company pays out profits to its shareholders, it does so in proportion to the number of shares you own.  This periodic pay-out of profits is known as a dividend.  A cash dividend means you receive your proportionate pay-out in the form of cash; a stock dividend is paid out in the form of additional stock in the company.

Second, you profit if the price of shares you own goes up.  In the event of a price increase, you could either

A) sell your shares to an interested buyer for a profit, or

B) hold onto your shares in the hope the value will increase even more.

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OPEN OUTCRY MAKATI STOCK EXCHANGEStocks have been actively traded in the Philippines over 80 years.  Virtually all of this trading takes place at an organized market known as an exchange.

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Old Manila Stock Exchange Building, Binondo Manila

Old Manila Stock Exchange Building, Binondo Manila

The Philippine Stock Exchange traces its origins back to the Manila Stock Exchange formed in 1927.  It is among the oldest exchanges in the Asia-Pacific.

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Makati Stock Exchange, circa 1971

Makati Stock Exchange, circa 1971

For nearly 30 years there were 2 independent exchanges in the Philippines–the Manila Stock Exchange and the Makati Stock Exchange (formed 1963).  In 1992 the two merged to form the Philippine Stock Exchange.

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The Philippine Stock Exchange

Ayala Tower One, Makati Trading Pavilion, Philippine Stock Exchange

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Pictured here is the famous Tower One & Exchange Plaza.  Above the beautiful pavilion is the spacious Makati trading floor, where you’ll find me during trading hours.

Another trading floor is based in Tektite Tower in the Ortigas Business District, about 20 minutes north of here.

The beautiful Tektite Trading Floor, Ortigas  Source: pse.com.ph

The beautiful Tektite Trading Floor, Ortigas -- Source: pse.com.ph

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Together, the two trading floors–operating under a “one price/one market” mandate– comprise the Philippine Stock Exchange.

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In 1993 the traditional open-outcry trading was replace by the automated Maktrade System designed by the Chicago Stock Exchange.

In 2010, the Philippine Stock Exchange and the NYSE Euronext Technology SAS launch the most advanced electronic trading system to date, known as the NSC®.

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The PSE boasts approximately 252 participating companies–known as “listed companies”–with a combined value of $103 billion or approximately 4.8 trillion pesos.  These are divided into the following sectors:

  • Financials
  • Industrials
  • Holding Firms
  • Property
  • Services
  • Mining & Oil

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Stock Brokers

When you purchase or sell shares of stock in a listed company, you are required to do so through a “stock broker”–a company authorized by Philippine law to facilitate buying and selling of shares on the stock market.  As of September, 2008 there were approximately 149 broker-dealers registered with the Securities Exchange Commission, Philippines, the regulatory body which oversees Philippine capital markets.  (See Due Diligence Helps)

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“Developing Country” status

The Philippine Stock Market is classified as an Emerging Market.

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Foreign Investment

Intriguingly, the lion’s share of price movement in the Philippine Stock Market is generated by foreign investors.  At times up to 80% of the daily trading volume is due to foreign brokers moving in or out of Philippine stocks.  Put another way, foreign fund managers specializing in Emerging Markets are currently the biggest players on the Philippine playing field  (see Foreign Brokers Dominate Philippine Stock Market).

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Get Started

See

The Philippine Stock Market: Investing Wisely

What Do Foreign Investors Know About Philippine Stocks That Filipinos Don’t?

Investor Glossary

E. M. Murray.  Personalized Stock Portfolios.  Professional Management.   Fixed Downside Risk.

E. M. Murray: Customized Stock Portfolios. Professional Management. Fixed Downside Risk.


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