Manila Stock Exchange

The Manila Stock Exchange is the historical forerunner to the modern Philippine Stock Exchange (PSE), which is the national stock exchange of the Philippines. For decades, it operated alongside its rival, the Makati Stock Exchange. Picture two separate trading floors in the same city, often listing the exact same companies but with different prices! This friendly (and sometimes not-so-friendly) rivalry ended in 1992 when the two exchanges unified to create a single, more efficient national market. Today, the PSE is the sole entity facilitating the buying and selling of stocks, bonds, and other securities of publicly listed companies in the country. It serves as the primary gateway for investors, both local and international, to participate in the growth of the Philippine economy. When people refer to the “Manila Stock Exchange” today, they are almost always talking about its modern successor, the PSE.

The history of the Philippine stock market is a unique story of rivalry and unification. The Manila Stock Exchange was established in 1927, making it one of the oldest exchanges in Asia. For 36 years, it was the only game in town. Then, in 1963, a group of businessmen broke away and established the Makati Stock Exchange, located in the burgeoning business district of Makati. This created a peculiar situation where two exchanges competed head-to-head, often trading the same stocks at slightly different prices, leading to arbitrage opportunities for savvy traders. This duplication was inefficient and confusing for investors. The push for a unified, modern, and more credible market led to their merger on December 23, 1992, officially forming the Philippine Stock Exchange we know today.

The main pulse of the Philippine market is the PSE Composite Index (PSEi). Think of it as the Philippines' equivalent of the Dow Jones Industrial Average or the S&P 500. The PSEi tracks the performance of 30 of the largest, most liquid, and most representative companies listed on the exchange. These blue-chip companies span various sectors, including banking, real estate, telecommunications, and power. When you hear news anchors say “the market is up,” they're usually referring to the PSEi. It provides a quick snapshot of the overall health and sentiment of the Philippine stock market.

The Philippine market is classified as an emerging market. This label comes with a distinct personality:

• High Growth Potential: Its economy is often growing faster than those of developed nations like the U.S. or Germany, driven by strong domestic consumption and a young, dynamic population.
• Dominated by Conglomerates: A unique feature is the dominance of large, family-controlled conglomerates—sprawling business empires with interests in everything from banking and real estate to retail and infrastructure. Names like Ayala, SM, and San Miguel are titans of the Philippine economy and the stock market.
• Higher Volatility: The flip side of high growth is higher risk. The market can be more volatile and susceptible to global economic shifts and local political developments.

For a disciple of value investing, the Philippine market presents a fascinating case study of opportunities and risks.

The potential for finding undervalued gems exists. The market is not as heavily analyzed by global institutions as, say, Wall Street. This can create information gaps that diligent investors can exploit. The long-term growth story, fueled by favorable demographics and increasing infrastructure spending, provides a strong tailwind for well-managed businesses. Furthermore, some of the family-run conglomerates, despite their complexity, can be excellent long-term compounders of capital if you can buy them at a reasonable price.

A wise investor must also tread carefully.

• Corporate Governance: The concentration of ownership within families can sometimes lead to corporate governance concerns. It's crucial to assess whether management acts in the best interest of all shareholders, not just the controlling family.
• Currency Fluctuations: If your home currency is the US Dollar or the Euro, you face foreign exchange risk. A strong performance in the local Philippine Peso (PHP) could be wiped out if the peso weakens against your currency.
• Political and Economic Headwinds: As with any emerging market, political risk and economic instability can cause sudden and sharp market downturns. Regulatory changes or political uncertainty can significantly impact business operations and investor sentiment.