Investors and other stakeholders at the Philippine Stock Exchange wait in suspense on the unfolding drama after the PSE suspended Abra Mining and Industrial Corp (“AR”) due to various trading rules violations.
For me, there was a sudden feeling of fear in investing my hard-earned money in the Philippine Stock Exchange (PSE). The question popped in my mind: “Is it safe to invest my money in Philippine stocks?”
LAST Wednesday, March 3, 2021, stock traders were in for a reality check when the trading of one company was suspended by the PSE (Philippine Stock Exchange), effective the next trading day.
It was said that the company, Abra Mining and Industrial Corp (“AR”) reached a total traded value of 1.25 Billion, more than the company’s market cap, a violation in the Listing Agreement and the Consolidated Listing and Disclosure Rules, hence the sudden suspension.
The disclosure of the trading suspension of AR was released in the public on the night of March 3, Wednesday. This action by the PSE, naturally, was met with questions in the local trading community.
For me, there was a sudden feeling of fear in investing my hard-earned money in the Philippine Stock Exchange (PSE). The question popped in my mind: “Is it safe to invest my money in Philippine stocks?”
In a suspension scenario trading is frozen from the time of disclosure. Thus, money invested on shares bought prior to suspension cannot be taken out as the shares cannot be sold. Your money is literally held suspended for an indefinite time.
This is a grim scenario for the regular investor.
For example, if I were an OFW who is looking to multiply my savings and gets convinced by the advertising of brokerage firms to invest my cash in the PSE to enjoy better interest rates than a bank deposit, I will consider investing in stocks because my money is withdrawable from the stock market any time.
As stock trading is a regulated industry, I am assured that all stocks available in the stock market are viable and worth my investment as “shady” stocks would not have been approved to be traded by the PSE or have been checked by the PSE for the safety of the investing public.
Then I buy stocks of AR as I see the potential in the mining industry, the Philippines being one of the world’s richest in terms of mined minerals.
Say I invested my P300,000.00 to buy the shares, banking on the future of the company.
The stock had risen, from March 1, 2021, 35%. In a few days, my money earned that amount, better than bank interest rates.
Then all of a sudden, on March 3, 2021, the PSE suspends trading of the stock because of some violation the company and its officers, which I never knew, until suspension.
What happens to my P300,000.00 and my 35% stock value increase? It is frozen, suspended in time, un-withdrawable until when?
I do not know when. So it seems to me that the PSE or even AR, is holding on to my money for an indefinite period.
What if I need my money today for an emergency? It could be argued that that’s the risk of investing your money in stocks.
However, I think it is unfair to be blindsided prior to a suspension. Surely, after this suspension, the stock will plummet at the market open due to this issue, which technically involved the PSE, virtually reducing my money and gains to near zero.
But what if this happens to more popular stocks like DITO, PHA and ACEN? This event surely raised alarm bells in the general trading public, even maybe to foreign investors.
As I have been in discussion with other traders, the questions in the minds of the public are:
1.Can AR’s violation be replicated by the other listed companies in the PSE? If it is possible, which may lead to another “suspension”, isn’t the burden or penalty shifted to the investing public as they have their cash in the stock suspended as well?
2.Given AR as an example, all stocks traded on a trading day are assumed traded with confidence in the PSE as they are all available for trading, thus, whatever happens to the funds on that day due to the action of the PSE should be accounted for by the PSE. Should the funds suspended be given back to the public as it is rightfully their money?
3.What is the exchange’s assurance to the investing public that they are not walking into a trap?
As one of the common traders in the PSE, I have a desire to see the PH market grow.
Especially now, during the pandemic, trading in the PSE can be an instrument of opportunity to help our countrymen in these challenging times.
This can be done only when our PSE gives us the assurance that our hard earned money is safe.
Unfortunately, the events that transpired this first week of March showed otherwise. (RMJ)