GSIS threatens pullout of P39-B stock investments

State pension fund Government Service Insurance System (GSIS) has threatened to withdraw its P39-billion worth of equity investments in the Philippine Stock Exchange (PSE) and in all other listed companies, mostly comprising of blue-chip stocks.

In a press briefing yesterday, GSIS senior executive vice-president Reynaldo Palmiery said the pension fund is also considering pulling out its holdings in other listed stocks if the PSE fails to shape up and resolve the differences among its members.

"This should be seen as a strong message that we would really withdraw our investments from the PSE unless the exchange gets its act together. If this kind of situation continues to prevail at the exchange then we might as well get out of the market. We wouldn’t want to put our investments at risk," Palmiery said.

"Officers and directors of PSE should join hands and set aside their personal differences for the good of the capital market. How can this organization move forward and implement the needed reforms if they continue to fight among themselves," he added.

The GSIS and private employees pension fund Social Security System (SSS) are the biggest investors in the stockmarket with their holdings in various blue-chip issues.

Palmiery said the GSIS is bent on returning the 1.4 million PSE shares it bought last February given the continuing infighting within PSE shareholder-brokers.

"The pension fund also wants to get back its P166 million investment for said shares," Palmiery said.

"GSIS is one of the biggest investors in the PSE yet they don’t want to listen to us. This is not their stockmarket. This is also our stockmarket," Palmiery said.

Palmiery said the ongoing conflict at the PSE may turn off foreign investors and could lead to the withdrawal of investments by other local and foreign funds.

"Our message is clear: Stop the infighting, start the reforms. If the situation will not change, we will not be surprised if other private investors whether domestic or foreign would likewise pull out," Palmiery said.

Apart from GSIS, other institutional investors that subscribed to PSE shares through a private placement were the PLDT Beneficial Trust Fund, San Miguel Corp. Retirement Fund, Kim Eng Investment Ltd and KE Strategic Pte.

Palmiery said the pension fund would exhaust all measures to return its PSE shares, representing 9.1 percent of the total outstanding capital of PSE.

"We will exhaust all means to have these shares withdrawn. We can always say that our expectations were not met. The objective of the GSIS in investing in the PSE is to see meaningful reforms but with the way things are going, our exchange will be left behind compared to other exchanges abroad which have been growing robustly," Palmiery said.

He said the GSIS might just sell its shares to a third party investor although no informal talks have yet been initiated with any group.

The PSE will tackle the issue on GSIS in its next regular board meeting on July 28.

But PSE chair Alicia Arroyo earlier said the GSIS should no longer be allowed to return its shares to the PSE, saying the deal has already been consummated.

She said the GSIS, just like any investor, can just sell the shares in the market.

PSE officer-in-charge Peter Favila said the exchange "is in no position to prevent anyone from selling their shares" in the bourse.

He is hoping though that things will be sorted out for the good of the capital market.

The pension fund’s decision to return its shares to the PSE was triggered by the dissension caused among PSE shareholders by the entry of private investors in the bourse.

This even led to the filing of a case against the previous PSE board and the private investors, including the GSIS.

About 80 PSE shareholder-brokers questioned the sale of 40 percent stake of the PSE to private investors, saying it was consummated in "undue haste" and was grossly disadvantageous to PSE stockholders.

They said the transaction price of P119.50 per share was "extremely low as the PSE shares were trading at P195 to P200 per share at the time the transaction was announced.

The PSE shares were bought by GSIS at P119.50 per share through a private placement undertaken last February which raised about P733 million.

SEC chairman Lilia R. Bautista, for her part, said the PSE can not just revert its shares to the PSE unless there was an agreement it could return the shares.