PSE: Short selling progress hinges on market recovery

The Philippine Stock Exchange, Inc. (PSE) is not bothered by the slow progress of its short selling product, its top official said.

“I’m not worried. As long as the short selling capability is there, that is the most important thing,” PSE President and Chief Executive Officer Ramon S. Monzon told BusinessWorld on the sidelines of a launch event in Makati City last week when asked about the development of the market product.

The PSE launched short selling in November last year, five years after issuing the revised guidelines on the trading strategy. However, the latest daily short selling report posted on the PSE’s website showed that there have been no developments on the new trading product.

Mr. Monzon said the short selling product was introduced to entice more foreign investors to consider the local exchange.

“Everybody is saying that this short selling doesn’t seem to have worked. We’ve worked on short selling and it is really to target the foreign investors so that when the emerging market or the Philippine economy loses favor, instead of selling out, they can hedge. That will create liquidity,” Mr. Monzon said.

He added that short selling has not taken off because of the market’s current performance.

“I don’t expect short selling to take off in a big way right away because the market is down. Brokers have also to adopt their back office. That’s all happening now,” Mr. Monzon said.

“Hopefully, when the market is up, everything is in place,” he added.

On Thursday, the 30-member Philippine Stock Exchange Index (PSEi) rose by 0.29% or 20.12 points to 6,850.16, while the broader all shares climbed by 0.2% or 7.45 points to 3,574.21.

The market had a shortened trading week due to the Chinese New Year holiday.

Compared to the previous week, the PSEi rose by 2.13%, or 142.91 points, from the close of 6,707.25 on Feb. 2.

Short selling is a “trading strategy that involves the selling of a borrowed security with the intention of buying it back later at a lower price,” which allows investors to hedge against the downside risk of an investment.

Eligible securities for short selling include all PSE index, PSE MidCap, and PSE Dividend Yield constituent companies and exchange traded funds. – Revin Mikhael D. Ochave, Reporter