PSE squabble triggers investment woes

From bulls to boars in the bourse - one of the country’s engines for growth.

This is how the squabble within the Philippine Stock Exchange has transformed the local bourse following disagreements among stockholders and the board over private placements and election issues over who would lead the PSE after its president quit his post.

Unless the board puts its act together, the much-needed reforms the PSE is pursuing to regain investor confidence and perk up the equities market may not be achieved.

The threatened pullout of the Government Service Insurance System of its P39 billion investments from the PSE, for one, was a direct result of the problems hounding the PSE leadership.

Amid the PSE wrangling, a $1-billion Asian fund has been set up by ASEAN and three economic cooperation groups, but the Philippines will likely miss out on the fund due to the absence of a formal domestic capital market.

Bangko Sentral ng Pilipinas Governor Rafael Buenaventura has said this has stifled the country’s ability to attract direct and portfolio investments from abroad and has hampered economic growth.

Buenaventura’s remarks came on the heels of a pronouncement of a top economic official that the infighting at the PSE has been sending an embarrassing signal abroad and discouraged foreign investors already wary of the shrinking stock market.

This, after the Securities and Exchange Commission started looking into allegations First Resources Management and Securities Corp., owned by former PSE chairman Vivian Yuchengco, might have engaged in "unusual deals" when it bought for GSIS shares of stock of Meralco.

But SEC officials said that based on preliminary findings, there was "nothing unusual" about the deals that First Resources conducted for GSIS.

PSE director Francisco Villaroman has objected to PSE offering the shares to third parties in a private placement, asking why there was no prior consultation with stockholders.

"I call this your ‘belated’ decision because many of us were against the rush to listing, arguing that premature listing would not accomplish anything meaningful, even the objective of divestment, for there was no real public interest and/or strategic investors, nor would there be even after the listing," to quote Villaroman’s letter to PSE.

PSE chairman Alicia Arroyo had said the deal entered into by the PSE and GSIS involving the latter’s purchase of PSE shares last February can no longer be cancelled and returned to the bourse.

Arroyo and GSIS president Winston Garcia reportedly had a heated argument over the process of selecting the new PSE president after Cayetano Paderanga Jr., resigned. The board decided to name PSE director Francis Lim as the new president of the bourse.

The SEC inquiry has prompted the counsel of First Resources to ask the regulatory body to show proof on allegations that the firm has been cornering all the stock market deals of GSIS for the first half of the year.

The SEC order, First Resources counsel said, "does not indicate which provision of the Securities Regulation Code or its implementing rules and regulations or other law, rule or regulation is referred to as not having been complied with."

In their letter to lawyer Ma. Elmira Alconaba, assistant director of SEC’s inspection and surveillance division last July 27, Attorneys Teodoro Cruz Jr. and Perpetuo Lucero Jr. said, "For our client to intelligently respond and cooperate with the Commission, it must be fully informed of the definite scope, nature and objective of the investigation. This is especially true considering that as already pointed out by Director Jose Aquino initial investigation conducted by the Commission’s Market Regulation Department did not show any violation on the part of our client."

A memo issued by PSE last July 20 disclosed the findings of the Market Surveillance Division showing no compelling incidence to investigate the trading activities of Meralco for the period between October 2003 until June 2004.

SEC’s decision to conduct an investigation into the business affairs of First Resources based solely on text messaging sent by unidentified texters had alarmed the business community, including the equities market and raised questions about the regulatory body’s move.

Several lawmakers, including Reps. Simeon Kintanar and Alfonso Umali had also questioned SEC’s directive relying on text messaging as basis for its probe into the transactions of First Resources.

"This is elementary, one just cannot look into the books of a corporation based on a complaint that was culled from text messaging," they said.