Importance of Foreign Investors’ Participation in the Philippine Stock Market
Foreign investors trade not only PSE bluechips but also all publicly-listed stocks in the PSE that are open to foreign investments.
Net foreign investment in a stock, often referred to as “foreign ownership” or “foreign participation” in a company’s shares, is an important metric for several reasons. Here are some of them:
Diversification of Ownership
A significant level of foreign investment in a stock can indicate that the company is attractive to investors from around the world. This diversification of ownership can be beneficial for the company as it reduces its reliance on domestic investors and can provide stability in times of economic or market volatility.
Access to Capital
Foreign investment can provide a company with access to a broader pool of capital. If domestic investors are not providing sufficient funding, foreign investors can step in and help finance the company’s growth and expansion.
Market Stability
Foreign investors can help stabilize a company’s stock price and overall market performance. They often bring in a longer-term perspective and are less likely to be influenced by local market sentiment, reducing the potential for extreme price fluctuations. PSE bluechips are often the go-to stocks of foreign investors in the Philippine stock market.
Increased Liquidity
A higher level of foreign investment can lead to increased trading activity in a stock, improving its liquidity. This can benefit both existing shareholders and potential investors by making it easier to buy and sell shares. However, I’ve noticed that their participation is no longer as much as pre-pandemic days. Today, it’s no longer just about the aftermath of the pandemic, but also of other economic reasons.
Information Flow
Foreign investors bring with them a wealth of information and analysis about global markets and industry trends. This can enhance the overall information available to the market about the company, potentially leading to better-informed investment decisions.
Currency Exchange Impact
Foreign investment can also expose a company and its shareholders to currency exchange rate fluctuations. If a significant portion of a company’s shares is owned by foreign investors, changes in exchange rates can impact the company’s financial performance and the returns received by shareholders. In the Philippines, foreign investors are allowed to have full ownership, up to 100%, of a domestic market enterprise, whether or not its shares are listed on the Philippine Stock Exchange, as long as the enterprise does not engage in any of the activities listed in the Negative List of the Foreign Investments Act of 1991, as amended.
Then President Rodrigo R. Duterte signed into law the Republic Act 11647 amending the Foreign Investment Act (RA 7042). Details are published in the Official Gazette of the Philippines.
Regulatory Considerations
In some countries, there may be regulatory restrictions on the level of foreign ownership in certain industries, particularly those deemed critical to national security or strategic interests. Companies must be aware of and comply with these regulations. Limitations are also found in the Republic Act 11647.
Corporate Governance
The presence of foreign investors can sometimes lead to improvements in corporate governance. They may demand greater transparency, accountability, and adherence to international standards, which can benefit all shareholders.
Risk Management
Diversifying the shareholder base by attracting foreign investors can be seen as a risk management strategy. It reduces a company’s dependence on the economic and political stability of its home country.
The importance of net foreign investment in a stock lies in its potential to bring diversification, capital, stability, and global perspective to a company, while also posing certain risks and regulatory considerations that need to be managed effectively. The level of foreign ownership can be a significant factor in assessing a company’s attractiveness to both investors and analysts.
The Only 3 Out of 30 PSE Bluechips With More Than P10 Million Net Foreign Buy on September 1, 2023
Rank: 3
Stock Code: URC
Company Name: Universal Robina Corporation
Industry: Food
Net Foreign: P18,806,180
Rank: 2
Stock Code: GTCAP
Company Name: GT Capital Holdings, Inc.
Industry: Holdings
Net Foreign: P45,619,415
Rank: 1
Stock Code: SMPH
Company Name: SM Prime Holdings, Inc.
Industry: Property
Net Foreign: P68,897,250
Is Market Sentiment for the 3 PSE Bluechips in Favor of Foreign Investors?
Universal Robina Corporation
Market Sentiment Index: BEARISH
18 of the 40 participating brokers, or 45.00% of all participants, registered a positive Net Amount
13 of the 40 participating brokers, or 32.50% of all participants, registered a higher Buying Average than Selling Average
40 Participating Brokers’ Buying Average: ₱113.75146
40 Participating Brokers’ Selling Average: ₱114.25351
8 out of 40 participants, or 20.00% of all participants, registered a 100% BUYING activity
10 out of 40 participants, or 25.00% of all participants, registered a 100% SELLING activity
GT Capital Holdings
Market Sentiment Index: BEARISH
14 of the 44 participating brokers, or 31.82% of all participants, registered a positive Net Amount
14 of the 44 participating brokers, or 31.82% of all participants, registered a higher Buying Average than Selling Average
44 Participating Brokers’ Buying Average: ₱572.04700
44 Participating Brokers’ Selling Average: ₱572.39729
9 out of 44 participants, or 20.45% of all participants, registered a 100% BUYING activity
21 out of 44 participants, or 47.73% of all participants, registered a 100% SELLING activity
SM Prime Holdings
Market Sentiment Index: BEARISH
17 of the 50 participating brokers, or 34.00% of all participants, registered a positive Net Amount
22 of the 50 participating brokers, or 44.00% of all participants, registered a higher Buying Average than Selling Average
50 Participating Brokers’ Buying Average: ₱29.89590
50 Participating Brokers’ Selling Average: ₱29.89411
8 out of 50 participants, or 16.00% of all participants, registered a 100% BUYING activity
14 out of 50 participants, or 28.00% of all participants, registered a 100% SELLING activity
In Which Direction Are the 3 PSE Bluechips Likely to Go?
For me, overall market sentiment takes precedence over the foreign investors’ net foreign amount. Universal Robina Corporation still trades below its 10-day simple moving average. It might attempt to approach its resistance at P117.00, but it could bounce away once it touches that line unless the overall market sentiment turns bullish. Based on the prevailing market sentiment, Universal Robina Corporation is likely to move closer to its support at P107.00.
It’s evident that GT Capital Holdings is testing the strength of the resistance at P573.50, which aligns with the 23.60% Fibonacci retracement. Its bearish Market Sentiment rating on September 1 indicates a lack of conviction in breaking the resistance. This doesn’t mean it will never break P573.50, but it suggests that the majority of investors are cautious.
This property stock has not broken the bearish trend in the long-term and short-term periods, as the current price trades below the 200-day and 10-day simple moving averages. SM Prime Holdings is poised to approach the support at P28.40, which aligns with the 38.20% Fibonacci retracement.
What Do You Plan to Do With These 3 PSE Bluechips?
I’ve presented to you some pieces of information vital in making a data-driven stock investment decision. What do you plan to do with these 3 PSE bluechips next week? Let me know in the comments below.
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