Philippines aims to entice retail investors The Philippine Stock Exchange is set to launch exchange traded funds and a new online share trading service aimed at small investors as it seeks to capitalise on a buoyant domestic economy to widen participation in its markets. The moves are a sign that some of southeast Asia's once-sleepy bourses are modernising to attract an emerging middle class able to invest in shares as well as making it easier for foreign investors to access them. Hans Sicat, PSE chief executive, said institutional investors accounted for over 90 per cent of average daily volume but noted there was an opportunity to attract retail investors by making it easier and cheaper for them to trade. PSE research shows there are only about 570,000 retail investors regularly using the PSE. That proved that the market was "totally under-developed" for a country of 92m people, Mr Sicat said. The exchange has funded the development of an online share trading portal that would be "white-labelled" to existing brokers, many of which could not afford to launch their own, or to upgrade existing systems. Our idea is basically to lower the entry cost. We hope that the broker-dealers will pass those cost savings on to those retail clients," Mr Sicat told the Financial Times on Monday at a World Federation of Exchanges meeting in Taiwan. We handed out our first test units last week so the official launch will be in a month or so. A monthly subscription to the service would cost $7-$8, compared with "two or three times that" for the few existing trading services offered by brokers, Mr Sicat said. The Philippine exchange is copying similar steps by exchanges in Thailand and South Korea, where retail participation in the stock market is far higher. In Thailand, retail investors make up about 55 per cent of the stock market. Foreign investor interest in the Philippines has intensified this year amid optimism that the government of president Benigno Aquino is finally making progress on tackling low tax collection and infrastructure bottlenecks. This month the Asian Development Bank raised its forecast for GDP growth for the country this year to 5.5 per cent, from 4.8 per cent, even as it lowered forecasts for Asia as a whole. Mr Sicat said such optimism had helped propel trading volume on the PSE to about a third higher than the same time last year. He said the launch of ETFs, expected by the first quarter, could help volumes further. Regulators were expected to approve the product this week, Mr Sicat said. The PSE also has moved to tackle perceptions of weak corporate governance by setting up an arm's length company to take over market surveillance from the exchange. Mr Sicat said this was designed to reduce the risk of conflicts of interest. Previously broker-dealers facing market abuse charges could appeal to the PSE board. They must now answer to the new company, made up of directors independent from the exchange and which reports to the country's markets watchdog. It's designed to deal with a perception we had that if a broker-dealer runs into problems we treated them with kid gloves. That's a major structural change," Mr Sicat said. The PSE is one of seven exchanges in the Association of Southeast Asian Nations working on developing what they call an "Asean asset class" of instruments that eventually can be traded across their bourses. The aim is to encourage the integration of Asean's capital markets so that investors in one country can more easily trade shares offered in another, through an electronic order routing system known as the Asean Link. On Monday the Stock Exchange of Thailand became the third exchange in the region to join the system after it was launched in September involving the Singapore Exchange and Bursa Malaysia.