BPI pegs planned ETF to MSCI index

Posted on May 20, 2013

AYALA-LED Bank of the Philippine Islands’ (BPI) planned exchange traded fund (ETF) product will track the performance of the MSCI Philippines index, a senior bank official said.

“Our ETF product will replicate the performance of the MSCI Philippines index,” said Theresa Marcial-Javier, BPI senior vice-president and group head of BPI Asset Management and Trust Group, told reporters in Makati City on Thursday last week.

“We are entering into a subscription agreement with them to be our index provider,” she added.

ETFs are the latest investment products approved by regulators to expand investors’ menu of options. They are securities that track an index, a commodity or a basket of assets like an index fund, but trade like stocks on an exchange.

The Philippine Stock Exchange (PSE) is awaiting approval by the Securities and Exchange Commission for the bourse’s ETF rules.

Hans B. Sicat, who last Saturday was reelected for a third term as president and chief executive officer of PSE, Inc., had cited ETFs as one of the new products the bourse operator plans to roll out within the year to offer more options to the public.

The MSCI Philippines index is composed of 18 companies of the 30-firm PSE index, which account for about 85% of total Philippine equities market.

Firms in the MSCI Philippines index include SM Investments Corp.; Ayala Land, Inc.; SM Prime Holdings, Inc.; Philippine Long Distance Telephone Co.; BDO Unibank, Inc.; Ayala Corp.; Aboitiz Equity Ventures, Inc.;

Universal Robina Corp.; BPI; and International Container Terminal Services, Inc., according to a MSCI Philippines Index report dated April 30.
Last week, MSCI announced that beginning May 31 Metro Pacific Investment Corp., will be added to the MSCI Philippines index, replacing San Miguel Corp.

The investment research group also removed GT Capital Holdings, Inc.; Megaworld Corp.; Puregold Price Club, Inc.; Robinsons Land Corp.; and Security Bank Corp. from the Small Cap Indices. The five companies will be replaced by D&L Industries, Inc.; EEI Corp.; Pepsi-Cola Products Philippines, Inc.; RFM Corp.; and San Miguel Purefoods Co., Inc.

Ms. Marcial-Javier noted that BPI’s ETF product will track the “large cap MSCI Philippines index.”

“The BPI ETF product will focus on investing in companies listed under the large cap category of the MSCI Philippines index. Given the current economic environment, there is broad-based growth in the economy and we are seeing large companies growing with the economy. Now that we are investment-grade, officially, after two ratings agencies upgraded our investment status, we now qualify in most fund managers’ investment list. These fund managers typically buy into the large cap index,” she explained.

The bank has reserved the name of the ETF with the SEC, Ms. Marcial-Javier said, but declined to disclose it saying “the bank has not signed up formally with MSCI.” “It is envisioned that BPI will manage the ETF but will have to work closely with other market participants such as two market makers, index providers and custodians in order to successfully manage it,” she said.

She said BPI has earmarked P250 million -- the minimum paid-up capital requirement for the product -- to establish an ETF.

Ms. Marcial-Javier added that BPI’s assets under management stood at P758 billion in the first quarter, about 6% more than the P716 billion recorded in the same period last year.

“In terms of percentage, stock funds grew faster because the base is lower; but in terms of absolute amount of the fund, bond funds outperformed,” she said. -- Ann Rozainne R. Gregorio