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INVESTING IN THESTOCK MARKET
Best Practices Forum SeriesApril 22, 2009
• Updates on the Stock Market
• Investing in stocks
• PSE initiatives
Presentation Outline
www.pse.com.ph
Stock Market Performance
Performance of PSEi
Up by 42%
Up by 26%
Up by 15%
Up by 42%
Up by 21%
*as of April 17,
2009
Down by 48%
Up by 12%*
www.pse.com.ph
Stock Market Performance
Lehman Brothers and Merrill Lynch collapse, AIG bailed out by US government
Crisis low of 1,704.41 pts (10/28)
PSEi since the subprime crisis
www.pse.com.ph
Rank IndexEnd-Dec
2008April 17,
2009YTD
Change1 Shenzhen Composite index 553.30 845.80 52.86%2 Shanghai Composite Index 1,820.81 2,503.94 37.52%3 Taiwan Taiex Index 4,591.22 5,755.38 25.36%4 Jakarta Composite Index 1,355.41 1,634.79 20.61%5 KOSPI Index 1,124.47 1,329.00 18.19%6 Nifty 2,959.15 3,384.40 14.37%7 Sensex 9,647.31 11,023.09 14.26%8 PSEi 1,872.85 2,094.13 11.82%9 Kuala Lumpur Composite Index 876.75 965.17 10.08%
10 Hang Seng Index 14,387.48 15,601.27 8.44%11 Straits Times Index 1,761.56 1,896.56 7.66%12 VN Index 315.62 334.14 5.87%13 SET Index 449.96 456.80 1.52%14 Nikkei 225 8,859.56 8,907.58 0.54%15 Topix Index 859.24 845.57 -1.59%
Stock Market Performance
PSEi vs. other key Asian Stock Market indices
*DJIA down by 7.4% YTD
300
400
500
600
700
800
900
1,000
1,100
1,200
2-Jan-07 2-May-07 2-Sep-07 2-Jan-08 2-May-08 2-Sep-08 2-Jan-091,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
2-Jan-07 2-May-07 2-Sep-07 2-Jan-08 2-May-08 2-Sep-08 2-Jan-09
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2-Jan-07 2-May-07 2-Sep-07 2-Jan-08 2-May-08 2-Sep-08 2-Jan-09900
1,050
1,200
1,350
1,500
1,650
1,800
1,950
2,100
2-Jan-07 2-May-07 2-Sep-07 2-Jan-08 2-May-08 2-Sep-08 2-Jan-09
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2-Jan-07 2-May-07 2-Sep-07 2-Jan-08 2-May-08 2-Sep-08 2-Jan-09
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2-Jan-07 2-May-07 2-Sep-07 2-Jan-08 2-May-08 2-Sep-08 2-Jan-09
www.pse.com.ph
Stock Market Performance – Sector Level
Performance of Sector Indices (2007-April 17, 2009)
Up by 35% YTD
Financial Sector
Industrial Sector
Holding Firms Sector
Property Sector
Services Sector
Mining Sector
Up by 15% YTD
Up by 13% YTD
Up by 4% YTD
Up by 4% YTD
Up by 28% YTD
Up by 5% 2007
Down by 47% 2008
Up by 12% 2007
Down by 52% 2008
Up by 18% 2007
Down by 56% 2008
Up by 17% 2007
Down by 58% 2008
Up by 28% 2007
Down by 40% 2008
Up by 85% 2007
Down by 62% 2008
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Stock Market Indicators
Average daily value turnover (in Php billion)
Domestic Market Capitalization (in Php billion)
Total Capital Raised (in Php
billion)
1,313 1,629
2,130
3,352
4,252
2,474 2,751
-
1,000
2,000
3,000
4,000
5,000
2003 2004 2005 2006 2007 2008 Apr 142009
2,974
4,766
5,948
7,173 7,962
4,069 4,463
-
2,000
4,000
6,000
8,000
10,000
2003 2004 2005 2006 2007 2008 Apr 142009
0.59 0.84 1.56
2.32
5.48
3.11
1.99
-
1.0
2.0
3.0
4.0
5.0
6.0
2003 2004 2005 2006 2007 2008 Jan.-Apr.14 2009
Total Market Capitalization (in Php billion)
17.84 23.53
68.49 55.57
(22.16)(30)(20)(10)
-10 20 30 40 50 60 70 80
2004 2005 2006 2007 2008
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Net Foreign Transactions (in billion pesos)
Stock Market Indicators
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• Impact of the crisis in the broad economy- Job losses – unemployment up slightly to 7.7% (Jan. 09)
from 7.4% (Jan. 08)- Some foreign firms closing shop- Exports slowing down – down 40% first 2 months
• Government projects GDP growth of 3.1% to 4.1% in 2009
The market’s underlying economy
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• Local banks are highly capitalized• Fiscal measures for the past few years have allowed for
flexibility in spending• Gross international reserves are at an all-time high• Large dependence on domestic consumption• Inflation tapering off• Liquidity still growing• BPO and OFW provide various multiplier effects in the economy• Increased infrastructure spending• Resilience of OFWs
The market’s underlying economy
“The Philippines has a story to tell”
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Asian growth rates
Country 2007 20082009
ProjectionChina 13.00 9.00 7.00 Vietnam 8.48 6.23 4.50 Indonesia 6.28 6.06 3.60 Malaysia 6.30 4.60 (0.20) Philippines 7.20 4.60 2.50 Thailand 4.90 2.60 (2.00) Hong Kong 6.40 2.50 (2.00) Korea 5.00 2.50 (3.00) Singapore 7.80 1.10 (5.00) Taiwan 5.70 0.12 (4.00) Japan 2.40 (0.70) (3.50)
*2009 based on ADB forecasts as of March 2009
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Investing in the stock market
• There are about 400,000 accounts in the stock market, less than ½ of 1% of the country’s population- vs. other markets – 10 -30% of their population
invest in the stock market• Saving vs. Investing• Common misperceptions
- Rocket science- Entails huge investments
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Investing in the stock market
The market as the barometer for economic performance
Positives- Economic growth- Low inflation - Low interest rates- Good employment figures- Good governance - Political stability
Negatives- Slow down in economic
activity- High inflation- Rising interest rates- Risk aversion- Declining world market- Governance concerns
www.pse.com.ph
Investing in the stock market
Market valuation as window to the performance of a company
Positives- Positive profits- Stable financials (good
return ratios)- Clear cut business plan- Regular dividend payments- Low P/E ratios- Practice of good corporate
governance
Negatives- Negative growth/equity- Leverage levels- Unclear business direction- No fundamentals- Poor investor relations
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Sector Financial Ratios
Price-Earnings (P/E) Ratio per Sector
Sector 2007 2008end-Mar
2009Financia ls Sector 17.17 11.92 11.58Industria l Sector 10.90 9.95 12.47Holding Fi rms Sector 12.51 7.49 8.02Property Sector 26.27 10.87 10.07Services Sector 17.05 10.22 12.31Mining & Oi l Sector 17.64 6.21 7.36Total Domestic Market 15.14 9.87 11.05
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Dividend Yield per Sector(in %)
Sector 2007 2008end-Mar
2009Financia ls Sector 1.44 3.92 3.55Industria l Sector 2.14 3.92 3.22Holding Fi rms Sector 1.20 2.94 2.46Property Sector 1.07 2.39 2.53Services Sector 4.10 8.74 9.00Mining & Oi l Sector 1.51 2.33 0.07Total Domestic Market 2.20 5.00 4.75
Sector Financial Ratios
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“It’s funny, the more I practice, the luckier I get. ”
- Gary Player
Investing in the stock market
www.pse.com.ph
As of April 15, 2009
No. of listed companies: 246Market Capitalization: P4.43 trillionAve. Daily Value turnover: P1.99 billionTrading Participants: 184 (132 Active)
Manila Stock Exchange (1927)
Makati Stock Exchange
(1963)Merged in 1992
Provides platform for trading equity products, warrants, and deposit receipts
About the PSE
www.pse.com.ph
About the PSE
1927 1963 1994
1998 2001 2003 2004
The Manila Stock
Exchange, Inc. (MSE) was established
The Makati Stock
Exchange, Inc. (MkSE)
was organized
The SEC granted the PSE
its license to operate as a securities exchange
SEC conferred SRO status to
the PSE.
PSE was demutualize
d
PSE sold 16.5% of its authorized capital stock to
strategic investors thru
private placement.The SCCP
became a wholly-owned subsidiary of
PSEPSE Listed by way of
introduction
PSE Historical Time Line
1992
Makati Stock Exchange &
Manila Stock Exchange merged
to become PSE
2008
PSE declares
100% stock dividend
www.pse.com.ph
Embarking on a new strategic agenda
“The investor of today does not profit from yesterday's growth. ”
- Warren Buffet
www.pse.com.ph
STRATEGIC AGENDA
LEVEL
UP
ist more companies and securities xpand and educate the investor basealue and enforce corporate governance standardsnhance shareholder value
aunch new products and services
pgrade market infrastructure & human resourcesartner with government & other stakeholders
www.pse.com.ph
• List more companies and securities- Liberalization of listing rules for mining companies- Help enforce laws requiring the public offering of shares of companies in various sectors such as
power, oil, utilities and telecommunications- Special tax incentives for newly-listed companies
Strategic Initiatives
• Expand and Educate Investor Base- 3-unit subject for college students (CMO 39)- Certified Securities Specialist Course (12-module
course) Short Course on Stock Market Investments – 3-day course
- Inclusion of stock market topics in High School curriculum
www.pse.com.ph
Strategic Initiatives
• Value and Enforce Corporate Governance Standards
- Heightened enforcement of disclosure rules- 10-minute rule- Selective disclosure rule- Blackout rule
- Creation of Market Integrity Board- Institutionalization of the corporate governance
scorecard for publicly-listed companies
- Creation of a Special CG Segment in the PSE (funded by the UK government)
• Enhance Shareholder Value - Dividend policy by listed companies- Website publication of dividend pay-outs by listed
companies
- Corporate Governance Improvement Plan for the PSE -
- Extended trading hours- Office integration
Strategic Initiatives
• Launch new products and services- Securities Lending and Borrowing Program- REIT product- Exchange Traded Funds- Index futures and options- Commodities trading
• Upgrading Human and Physical Resources - New trading system - Enhanced Surveillance system
Strategic Initiatives
• Partner with government and other stakeholders- Personal Equity Retirement Account Act (PERA) –
enacted into law- Credit Information System Act (CISA) – enacted into law- Real Estate Investment Trust - passed by Senate- Abolition of DST on secondary trading – passed by the
House of Representatives on third and final reading- Corporate Recovery and Insolvency Act (CRIA) –
technical working group report done last Congress- Collective Investment Scheme Law (CISL) - technical
working group report done last Congress- ASEAN Collaboration - MOA signed with ASEAN
Exchanges
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“Fortune favors the brave.”-Virgil, Aeneid
THE PHILIPPINESTOCKEXCHANGE
Disclaimer: This presentation has been prepared by the Philippine Stock Exchange(PSE) for exclusive use of the party/ies to whom the presentation is being delivered. The PSE and its affiliates, officers, directors, employees and agents do not make representations or warranties, express or implied, on matters such as, but not limited to, the accuracy, timeliness, completeness, currentness, non-infringement, merchantability or fitness for any particular purpose of the information and data herein contained. The PSE assumes no legal liability and responsibility for any loss or damage arising from any decision made or action taken in reliance of information contained herein, or for the consequences of any errors or omissions, and does not represent that the use of information and date herein contained would not infringe privately owned rights. In no event shall the PSE or any of its affiliates, officers, directors, employees, or agents be liable for any loss or injury caused in whole or in part by contingencies beyond their control or negligence in procuring, compiling, interpreting, editing, writing, reporting, or delivering the contents of this presentation. The information contained herein is solely for information purposes only, does not constitute investment advice, and is not intended to influence investment decisions. Advice from a securities professional is strongly recommended before making any legal, financial, or other important decisions.