A Survey on the Investment Portfolios of

Philippine Institutional Investors

Erlinda S. Echanis and Ana Tabunda

The study gathered data (from December 1993 to February 1994) on the profile of the investment portfolios of Philippine institutional investors, their criteria in making investment decisions and their investment decision processes and performance practices.  The 179 sample firms had a total investment portfolio approximately P600 billion.  Results of the study showed that the investment portfolios of Philippine Institutional investors are dominated by government securities and foreign currency.  Furthermore, investments in publicly listed stocks comprised a very small percentage (only 2% of the total portfolios) mostly placed in blue-chip commercial-industrial stocks.  Other findings include: 1) investment portfolios are not diversified; 2) investors consider “liquidity” as an important factor in the selection of an investment instrument, and 3) the use of T-bills interest rate as a performance measurement criterion discouraged the investment in publicly listed stocks.

Value Orientations in Selected Filipino Work Groups

Jasmin E. Acuña and Emerlinda R. Roman

The study had two objectives.  First, to explore, using both Hofstede’s original questionnaire and a modified Hofstede questionnaire, if Hofstede’s original results would be obtained.  And second, to explore if there are significant differences in the above value orientations among the sample groups chosen.  The overall sample indices were found to be about the same as those estimated by Hofstede over fifteen years ago particularly for power distance and masculinity.  On uncertainty avoidance and individualism, his estimates were significantly lower than this study’s overall sample means.  Value orientations also differed across a wide range of occupational groups and research sites.  Two questionnaires (Hofstede’s original questionnaire and the research team’s questionnaire) were used and found to be congruent.  Thus, either one may be used for measuring intergroup differences.  The results of this exploratory study provide enough basis to enlarge the sample in order to identify superordinate variables that will further explain the differences between groups obtained in this study.  The next phase will report the findings on fifteen occupational groups and thirty research sites.

The Ex-Date Wealth Effect of Rights Offerings in the Philippines

Roy C. Ybañez

Rights offerings in the Philippines in the period January 1987-March 1995 show significant market adjusted returns averaging 7.6% on ex-date.  The excess returns are not driven by outliers, the sectoral mix of the offerings, nor by the large representation of 1994 offerings.  We surmise that the excess returns represent a liquidity premium and hence, reflect a normalization of prices on ex-date.  The prospects of illiquidity and a significant increase in investments in the stock could put downward pressure on stock prices (possibly soon after the announcement of the offering).  We find a high correlation between excess returns and the proportion of capital rendered illiquid.  The sample consists of 42 offerings by 28 companies with transactions for each of the 10 days surrounding the ex-date, out of a total 110 offerings by 63 listed companies during this period.

Japanese Foreign Direct Investment in the Philippines

Lina J. Valcarcel

It is believed that foreign direct investments are beneficial to the host country for a variety of reasons.  It is in this light that Japanese FDI is examined.  Our survey results, interviews and other published sources indicate that Japanese firms contribute positively to the economy by providing employment, improving technology and promoting export trade, among others.  It is noted that Japanese firms are profitable and compare well with the performance of those in the top 1,000 corporations.  If Japanese FDI is doing well in the country and is contributing positively to the economy, how can they be attracted to locate here?  Political and economic stability is a major factor to consider.  The infrastructures needed for efficient and cheap operations are also important considerations for locating here.  Export promotions should also be encouraged instead of import substituting industries.  The availability of low cost, educated and highly trainable work force knowledgeable in the English language gives us comparative advantage over our Asian neighbors.  The Philippines must harness its resources not to miss the current wave of investment if it wants to catch up with its ASEAN neighbors.  Otherwise, it may find itself sliding backwards and be completely left out of the global market.

An Empirical Study on the Weak-form Efficiency

of the Philippine Stock Market

Arthur S. Cayanan

This paper determines the weak-form efficiency of the Philippine stock market.  Three-year daily returns (1990-1992) of six stocks which account for about 60 percent of the index as of December 31, 1992 were used in the study applying cointegration tests.  These stocks are ANSCOR A, ALI B, First Philippine Holdings A, PLDT “Common”, PNB, and SMC A.  The results show that the market is not efficient in the weak-form which suggests that technical analysis can be useful in analyzing the Philippine stock market.

Vendor-Manufacturer Cooperation for Inventory

Reduction and other Gains

Elvira A. Zamora

Increasing competition and changing production technologies are making it necessary for manufacturing companies to establish closer and more meaningful relationships with vendors.  This study examined the experiences of three local manufacturing companies which are involved in vendor-based quality improvement programs.  Focus of the research was on the nature of the vendor programs, the vendor selection process, problems encountered during implementation, and major benefits derived.

Pricing the Pre-termination Option in Deposits:

An Adaptation of the Binomial Option Pricing Model

Bienvenido M. Aragon

Bank deposits contain an option which allows the depositor to break the deposit prior to maturity and reinvest the funds at a higher yield.  How much is this option worth? This is the question that this paper tries to answer by applying the Binomial Option Pricing Model (BOPM).  A price for the pre-termination option was determined and shown to be “correct” in the sense that an arbitrage opportunity is not present at that price.  The surprising, counter-intuitive result is that the option price is invariant relative to pre-termination penalties.  Why this is so is a matter that may merit further analysis.