“Democratize” Stock Market, Solon Urges Brokers

July 7, 2007 at 4:51 pm | Posted in Uncategorized | Leave a comment

Rep. Joseph Santiago

MANILA (Mindanao Examiner / 07 Jul) – Rep. Joseph Santiago, of Catanduanes province, on Saturday urged regulators, publicly listed firms, stockbrokers and other stakeholders to find ways to boldly reform and democratize the local equities market so that the enormous new wealth it has been generating may be distributed to more Filipinos.

He said less than 500,000 Filipinos are directly making money out of the market.
“More aggressive efforts are absolutely imperative to enable and encourage more Filipinos to get invested in the market, to allow the broader apportioning of new riches,” Santiago said in a statement sent to the Mindanao Examiner.

To get an idea as to how much new money is being created by the market, Santiago said one simply has to look at the stock price of the country’s dominant carrier, Philippine Long Distance Telephone Co. (PLDT).

According to Standard and Poor’s Equity Research Services, P10,000 invested in PLDT’s common stock five years ago is now worth P84,634, without counting dividend income.
The stock market has been hovering at or near record highs, buoyed by strong corporate earnings, the country’s improved economic and financial outlook and massive local as well as global liquidity due to low interest rates. The Philippine Stock Exchange composite index hit a fresh high of 3,822.41 on Friday.

To reform and democratize the stock market, Santiago proposed:Incentives to mutual funds that cater to small investors, offer low management fees and are fully, if not mainly invested in publicly listed stocks;

Direct stock purchase schemes, just like in the United States, that will enable long-term savers to steadily buy and accumulate on installment and absolutely commission-free, small lots of shares straight from the issuing publicly traded firms;

Automatic dividend reinvestment programs for small, long-term shareholders, whereby any cash dividends payable to them may be used to buy more company stock;

Perks for online as well as offline discount stockbrokers that offer cheap commissions to retail investors; and the extension of the mandatory 20 percent discount for senior citizens and pensioners to include broker’s commissions;

A system wherein any residual or uninvested cash in a every investor’s brokerage account will be swept every day into a money market fund earning interest income for the investor’s account; and grants to schools, including public high schools that provide extra education programs on the stock market.

Santiago said stockbrokers would not be harmed by the proposal to allow small investors to directly purchase and pile up shares in small lots from issuing firms over extended periods.

“In fact, stockbrokers will benefit from direct purchases. Small savers will have no choice but to sell through brokers later on. The scheme is limited only to purchases,” he said. (Mindanao Examiner)

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