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PSE board sets sights on tasks at hand

Posted on May 04, 2015

AFTER SECURING a fresh one-year term, the newly elected board of the Philippine Stock Exchange, Inc. (PSE) is focusing on completing the acquisition of a controlling stake in the Philippine Dealing System Holdings Corp. (PDS) and migration to a new trading system as the exchange concludes its three-year plan this year.

“The three-year plan ends this year and part of the highlights of that three-year plan are these two major things: technology being shifted to NASDAQ X-stream and the PDS system,” PSE President and Chief Executive Officer Hans B. Sicat told reporters after the company’s annual stockholders’ meeting last Saturday at the Wack Wack Golf & Country Club in Mandaluyong City.

Fourteen out of the 15 PSE directors were reelected for a fifth term in that meeting, where independent director Cornelio T. Peralta retired and was replaced by Ramon S. Monzon.

PSE shareholders also authorized the exchange to “go ahead” with a plan to secure at least 67% of PDS, the operator of the country’s fixed-income bourse.

“It’s a valuation of P2.25 billion and as we run through the process, we’ll be able to close by end of July,” Mr. Sicat said, noting that the timetable “requires the Securities and Exchange Commission (SEC) giving the final approval within that time frame.”

“We’ve sent updated letters to all stakeholders... I think by middle of this month, we’ll have the final answers and we’ll commence the actual process.”

PSE owns 21% of PDS, while Singapore Exchange Ltd. holds 20%. The Bankers Association of the Philippines (28.9%), San Miguel Corp. (4%) and Golden Astra Capital (0.36%) have agreed to indicative terms of the exchange’s offer to buy their stakes.

The PSE intends to fund the buyout of the PDS minority shareholders through a combination of cash and borrowings. The bourse had P1.05 billion in cash at end-2014, according to the exchange’s latest regulatory filing.

However, the full merger of the exchanges -- including integration of the PDS’ depository function into the PSE’s clearing house -- will take more time because “that will require a lot of regulatory approval,” Mr. Sicat said.

The merger with the PDS will bring the Philippine capital market to the “next level” and enable the bourse to “better meet the trends of globalization,” he said.

Also high up in the agenda of the PSE for the year is the shift to the NASDAQ OMX’s trading system, known as X-stream, “by midyear or earlier if possible.”

X-stream will replace a trading platform that has been in place since July 2010 -- PSETrade -- developed by NYSE Euronext Technology SAS.

“We’re in the middle of a lot of market testing. We’re trying to make sure when it’s turned on, we’ve addressed all the items that were raised by market participants,” Mr. Sicat said.

The acquisition of PDS and the adoption of the NASDAQ trading system are part of the exchange’s three-year strategy, which aims to make the PSE a “world-class exchange” with the introduction of more products and services.

Under the existing board, now serving its fifth term, the PSE had seen implementation of afternoon trading, reinstatement of a minimum public float requirement, the release of a list of Shariah-compliant companies and the launch of new trading products such as real estate investment trusts and exchange traded funds.

Asked on the expected subdued initial public offering (IPO) activity at the PSE, Mr. Sicat replied: “We’re looking at our internal processes.”

“Let’s see when they all come out -- there might be a flurry of issuances,” he said.

“If you take a look at how it’s going, the fund-raising target of P200 billion is very much on track.”

The target takes into account the entry of 10 new names at the stock market, including those that joined through the backdoor route. So far, only Crown Asia Chemicals Corp. has joined the bourse this year via a P222.78-million IPO.

The PSE is also looking at further cleaning up the roster of listed companies after initiating last week delisting proceedings on Masteel Consolidated, Inc. for failure to submit quarterly and annual reports.

“There are a few other companies that we’re trying to see if there are processes or solvable issues from an exchange perspective. If they can’t solve it, we need to go the distance by delisting,” Mr. Sicat said. -- Krista Angela M. Montealegre