Traders in the Philippines will now be allowed to short-sell stocks after a near 30-year wait.
A proposal to allow short-selling was first aired by the Philippine Stock Exchange (PSE) back in 1996. However, it has taken three decades or so for the trading strategy to become a practical reality.
The Securities and Exchanges Commission initially approved the proposal in 2019, pending further market consultation, but the Covid pandemic prolonged its passing.
As of November 6, a total of 52 stocks and one ETF traded on the PSE will be accessible to traders. These are mostly stocks included in the main PSE Index as well as selected stocks from the PSE MidCap and PSE Dividend Yield indices.
According to the exchange’s president, Ramon Monzon, the move will give investors more options for dealing with volatile market conditions.
“Without short selling or any index futures we will be a long-only market, so if there’s uncertainty on the economy, the political situation or even in emerging markets, they will all sell,” he told Bloomberg. “With short selling, they can stay here and hedge.”
The PSE is also looking to attract more foreign investors to the Philippines securities market at a time of low activity. Average daily stock transactions have fallen by nearly 40% in the past decade while foreign investors have withdrawn more than US$6bn since 2018.
However, given that many stocks in the Philippines market are trading at a low valuation, the opportunities for big gains from short-selling will be limited in the short term.
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