Pinoys and the Stock Market, part 2By Randell Tiongson on July 26th, 2012
With all the good things we hear about the Stock Market, are we to expect that more Pinoys are now investing there? Not really. Data from the Philippine Stock Exchange (PSE) reveals this –
In 2011, there were 505,054 accounts registered among all active trading participants, up by 1.3% from the previous year’s total of 498,838 accounts. Of the total 505,054 accounts, 478,362 or 94.7% were considered retail while 26,692 or 5.3% were classified as institutional accounts.
Here’s more –
Of the total accounts in 2011, 157,535 or 31.2% were considered active. Active accounts are defined as accounts that have traded at least once during the year. The number of active accounts in 2011 rose by 31.3% from the previous year’s total of 120,016 accounts.
What the numbers are saying is this – only a handful of Pinoys are invested in the PSE! 500 K out of over a 90 M population makes that a very small percentage – roughly 0.5% of the population. With all the gains of the market in the recent years, Pinoys could have taken advantage of improving their financial situation… but unfortunately, only a handful did. While I don’t expect a staggering percentage of Pinoys investing in the market because of its risk and complexity, 0.5% is just way too miniscule. By contrast, some countries have 30 to 50% (or more) of their population investing in their Stock Market directly or indirectly through funds.
There are reasons why people stay away from the Stock Market but the top two reasons I would like to believe is ignorance and fear.
Admittedly, the Stock Market requires some studying before anyone should enter it. I always remind people not to invest in anything you don’t understand; but the Stock Market isn’t also rocket science and I have faith that the average Pinoy would be able to understand equity investing – or at least 1/3 of our population can. Reading a starter book, researching over the internet or better yet attending a seminar will do wonders to enlighten Pinoys on what the Stock Market is all about. Basic understanding of how the Stock Market operates is a worthwhile endeavor for us Pinoys because we can really benefit by investing in it – at the same time help the country grow its capital market (a discussion for another blog). A healthy and robust stock market that is sizeable in volume is very good for the economy. Currently, the PSE is healthy and robust albeit with very little volume.
Fear is another issue amongst us Pinoy. It has been a noted fact the Filipinos are risk-averse in nature, meaning we tend to avoid risks especially in investing and business. Proof of which is our huge money in Savings account and Special Deposit Accounts. BSP numbers pegs bank accounts (Savings, Checking & Time Deposits) at about P 5 Trillion while Special Deposit Accounts (SDA) at approximately P 1.5 Trillion. A big chunk of the money of the Pinoys is not really being invested and definitely not earning properly. While Bank accounts and the SDA are really safe investments, their yields are almost certain to be below inflation rates which means that most of our money are really eroding in value.
My recommendation is this – let us all learn about investing because it is one of those things that will bring us financial freedom and it can empowers us. Let us also not be crippled by fear because if we risk nothing, we gain nothing and I don’t mean speculating or gambling our hard earned money away – we can learn to diversify and practice prudent investment planning. If individual investing in the Stock Market may be too much for us to bear, then I suggest we look at pooled equity funds like the UITFs or Mutual Funds as well. Regardless of investing directly or indirectly, I believe it’s time for Pinoys to learn and invest in the Philippine Stock Market.
My 2 cents.