Listed firms well capitalized
Trading participants in the Philippine Stock Exchange remain well capitalized, despite the recent sharp volatility in the equities market, the Securities and Exchange Commission said over the weekend.
SEC said in a statement trading participants were compliant with the risk base capital adequacy requirements mandated by the corporate regulator.
“This demonstrates the strong resiliency of the trading participants amid the recent sharp volatility in the prices of PSE listed stocks,” SEC said.
A review by the SEC of the report of Capital Markets Integrity Corp. showed that among the 132 trading participants that filed their RCBA reports as of end Aug. 24, around 98 firms suffered a decline in their net liquid capital due to the drop the stock prices.
The report showed that 67 trading participants experienced deterioration in their RBCA ratio and 22 trading participants posted a drop in their unimpaired paid-up capital due to the paper losses in their propriety investments.
The recent market decline also weakened 88 trading participants due to an expansion on their aggregate indebtedness relative to net liquid capital.
Despite these findings, SEC said none of the trading participants breached any of the RCBA thresholds as of Aug 24.
RCBA requirements pertain to the minimum required liquid reserves to protect the firms, their investors, customers and the economy as a whole.
The requirements ensure that the broker dealers have enough capital to sustain operating losses while maintaining a safe and efficient market.
The trading participants of the PSE are required to comply with several RBCA requirements such as minimum RBCA ratio of 110 percent, minimum net liquid capital of P5 million or minimum of 5 percent of aggregate indebtedness, whichever is higher, minimum capital up capital of of either P100 million trading participants who registered after the effectivity of the Securities Regulation Code and P30 million for trading participants already existing before the effectivity of the said law.
The bellwether Philippine Stock Exchange index suffered a massive drop that wiped out P764 billion worth of market capitalization, on huge sell off that was triggered by concerns about Chinese yuan devaluation on Aug. 24.
The PSEi dropped 487.97 points or 6.7 percent on that day, the steepest one-day drop since June 13, 2013 when the index lost 6.75 percent.
PSEi’s 487.97-point decline was also the sharpest single-day loss in terms of nominal numbers.
The equities market, however, has recently recovered as the outlook on domestic economy remains positive despite developments overseas.