Pullout of US pension fund depresses local stock mart

The largest pension fund in the United States is withdrawing its investments in the Philippines and three other key Asian markets, causing the local stock market to close sharply lower yesterday on concerns that other overseas investment funds would follow suit.

The California Public Employees Retirement System (Calpers), which manages $151 billion in assets, is pulling out of the Philippines, Indonesia, Malaysia and Thailand, citing factors such as poor financial and legal transparency, labor standards and human rights.

In reaction, the 30-company Philippine Stock Exchange Index ended below its 1,400 psychological support, losing 47.06 points, or 3.3 percent, to close at 1,396.38 points. Thursday, the index fell 0.7 percent. Wall Street’s steep loss Thursday also gave investors more excuse to head for the exit, traders said.

News that Calpers is selling its equity investments in the Philippines and three other Southeast Asian markets may have triggered a rush to unload shares, said BPI Securities’ assistant vice president Spencer Yap.

"This can no longer be just a technical correction, because it’s too steep," said Yap. "The Calpers news may have raised concerns that other funds will follow suit."

Local monetary authorities, however, shrugged off Calpers’ decision saying they are not expecting foreign funds to emulate the decision of the largest US pension fund to pull its investments out of the country.

Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura said: "I don’t thing other pension funds or investors will follow suit. They are independent."

Finance Secretary Jose Isidro Camacho said the Calpers’ decision "really doesn’t affect us."

"If at all, it could be the (internationally traded) bonds that will be affected, (but) our bonds are strong," he said.

The US fund’s total investments in the Philippines stood at around $25 million, fund managers estimated.

"This accounts for a one-day trading volume in the local market. it should not have any significant effect," AB Capital Securities Inc. analysts said Jose Vistan.

Review of investment policies

The move by Calpers came after a review of its investment policies which led to strict new standards that include social and ethical factors as well as business issues.

"We now have in place a blueprint to examine which emerging markets can support institutional investment," said Calpers investment committee chairman Michael Flaherman.

The move is the first of its kind by the fund to take into account social issues–which are taking on increasing public importance– as well as purely financial factors and could spark a new trend, analysts said.

It said Malaysia and Indonesia had scored poorly on the human rights front, the Philippines failed mostly on financial criteria, but Thailand did badly for a mixture of reasons.

The move was made all the more surprising by the fact that the four Asian markets targeted are among the best performers in the growth region and –except Malaysia– have risen by more than 20 percent this year alone.

The decision by the fund will affect around $1 billion in emerging market holdings, Calpers said.

Local market turns jittery

Despite the market’s steep fall yesterday, the main index is still up 20 percent from its closing level at the end of 2001.

The market enjoyed a steady run-up from Feb. 8 to 19, with the main index rising 9.6 percent during that period, which boosted the index to its highest level in eight months.

Joseph Roxas, president of Eagle Equities, said most brokers expected the downtrend since the market has gone on a correction phase. This means investors have opted to take profits from stocks that have surged during the mild rally.

He added the pullout of Calpers also affected trading as "people who had profits to take become jittery."

Roxas said the extended break owing to the special non-working holiday for the commemoration of the first People Power Revolt on Monday also induced investors to liquidate ahead of the long weekend.

Only 12 stocks managed to post gains yesterday, most of them third liners such as First e-bank, Steniel, ATN Holdings, Urbancorp Investments, Keppel Marine and PNCC.

Blue-chip Philippine Long Distance Telephone Co. was the most active, down P30 pesos, or 5.8 percent, at P490 on 510,960 shares traded, in step with the 6.4 percent loss suffered by PLDT’s American Depositary Receipts Thursday. – Conrado Diaz