The PSE is in early stages of discussions with the SZSE for the latter to buy a stake in the local bourse, according to a report in local publication Business World, quoting Ramon Monzon, PSE’s president and CEO.
However, the investment is limited to a maximum of 5% ownership. Under the Philippines Securities Regulation Code, no individual can own more than 5% of the exchange.
With a stake in the PSE, Monzon hopes that both bourses could put in place a Shenzhen-Manila Connect, which is similar to the Hong Kong-Shenzhen and Hong Kong-Shanghai Connect, which provides investors a channel cross-border trading.
He did not provide a timeline for the linkage and said it may take some time as both bourses have to iron out some issues, such as cross-border payment and settlement. In addition, the country’s central bank, The Bangko Sentral ng Pilipinas, will have to get involved.
Connecting both bourses may boost the Philippine equity market. The PSE has an average daily turnover of $128m, which is the lowest among six major Southeast Asian markets, according to the report.
“China, being very liquid, will readily invest in the Philippine market,” Monzon said in the report.
However, he acknowledged it is unlikely that local investors will find foreign markets attractive.
Philippine investors, in particular high net worth investors, have a preference for local investment products. Jane Manago, head of wealth management at Rizal Commercial Banking Corporation (RCBC), told FSA previously that she sees little demand for feeder funds among clients, who are more interested in the Philippine stock market than global equities.
Asean trading link closed
Monzon’s comments come at a time when the Asean Trading Link, which connects the Singapore, Malaysia and Thailand bourses, was shut down.
The Singapore Exchange quietly made the announcement that the Asean trading linkage is no longer in operation effective 6 October. The SGX’s brief comment was made on a consultation paper about proposed changes to the bourse’s rules.
The trading link was first launched in 2012. The bourses of Indonesia, the Philippines and Vietnam were expected to eventually join the linkage.
