Conversations with the PSE President

Conversations with the PSE President

Nov 05, 2014

I had the privilege to have a one-on-one with the president of the Philippine Stock Exchange, Hans B. Sicat. When I arrived at his office, he was finishing up his meeting and I was led to his room so I had the chance to see his awards, photos and other office knick-knacks and learned a few things. His wife looks lovely in a black and white photo, he has three grown-up kids, he likes sports and the “B.” stands for Brinker, his second given name. He was named after the main character of the book Hans Brinker or The Silver Skates, a story about a boy who put his finger to plug the hole in the dike to prevent flooding. It became his mother’s favorite book while she was recovering from an operation when she was only fourteen and she vowed to name her son Hans Brinker.

A common friend who’s now residing in Europe sent me a PM (Private Message on Facebook) to say that she saw the video of Hans reading Chapter 2: The Retelling of The Richest Man in Babylon. Then she went on to say, “He now looks like a tall Jose Rizal!” That made me remember his contribution to my Christmas article entitled Memorable Christmas Gifts. He said that his recent memorable gift was from his dad – Jose Rizal’s Noli Me Tangere and El Filibusterismo (the latest English translations). But I guess Hans is the happy version because he’s always flashing a smile. He’s a kind person and despite his busy schedule, he doesn’t make you feel “Hurry up, I have a ton of things to do!” I will be forever grateful to him for his generosity accommodating my request in between his trips and hectic work schedule.

Join me in this interesting conversation with the president of the PSE, one of the world’s fastest growing stock exchanges.

Rose Fres Fausto interviews Hans Sicat

According to Hans, my latest book reminds him of the Parable of Talents – how we should use our gifts to move forward. He said the book talks about Arkhad from dreaming of being rich to fulfilling his dream using the three basic laws of money. The first law Pay yourself first also hits home because it reminds him of what his parents used to tell them, “Save the first 10% of whatever you have.”

Here’s an excerpt of the interview:

Would you like to share with us any of your childhood money memories?

When I was a young kid, we were given a weekly allowance and we were supposed to get everything from there including the 10% savings and when I said it wasn’t enough, may father said, “You better write me a memo with three good reasons why I should increase your allowance. “

I find myself doing the same to my three children now (aged 17 to 21) – requiring them to save at least 10% and asking them to justify their expenses. They’ve had their own savings accounts since they were kids and now my two older kids (daughters), who are studying in the US, are investing in mutual funds there.

You had two decades of international investment banking career, and now you’re the head of PSE. Are you happy with our financial market right now?

There’s a lot of development that needs to be done. Our advocacy is wide range – deepening the market, having more participants both on the investor side and issuer side. On the education aspect, we are trying to spread the word that we really need to save and invest. The third leg is the corporate governance; we want a level playing field with the highest level of transparency. These three things will redound to a more robust market.

In the last three years that you’ve been PSE president (and I heard that’s already one of the longest terms?), what are you most proud of in terms of accomplishment under your leadership?

First is that corporate governance level has increased. A lot of companies are practicing a higher level of transparency and due diligence. Second is we have introduced new products into the market. Third is the increase in volume, depth and number of transactions in the market over the last years. Market value increased by over 100% in the last 18 months. A deep capital market will motivate more investors to come in and more issuers will come in, creating a virtuous cycle. Everybody wins! 

Is it really just less than 1% of our population that’s invested in the stock market up to now?

That’s the number of unique accounts. The interesting part of the statistics is that when you look at the type of accounts. In terms of number of accounts, 80% is comprised of retail investors and 20% institutional investors. But in terms of value, it’s the opposite where up to 85% are institutional. But the good news is we have introduced more avenues to have online accounts, an additional service of PSE offered to broker dealers. The market growth in that particular segment is phenomenal. Over the last 2.5 years, we’re measuring around 45% compound annual growth rate. Of course, we’re starting from a low base but this growth rate means growth in the retail sector. The trend will continue and I’m happy about that. Another interesting statistic is that the online transactions now are eight times higher compared to the time when we started measuring it last year. The trend line is very positive.

Let me challenge you a bit. You’re so used to talking to people who are already investing in the stock market, who already understand stock investing. How would you invite the regular Juan? How will you convince the regular Pinoy?

The first thing that I will say is for him to find a broker so he can open up an account. It’s possible to ask your existing bank because they usually have their stock broker subsidiaries. If you’re going to put out a small amount, it might be easier to just buy an ETF (Exchange Traded Fund) and that will be your introduction to the market. As you gain experience and understand the terminology, only then should you branch out to individual stock picking. Mutual funds are also a good way to be introduced into the stock market.

What are you most excited about in the stock market?

Growth prospects. The economy is doing well and that’s a great driver for more products and services in the stock market. We wish to attract more issuers. Hopefully, they will understand that having an equity leg in your funding requirement is an important part of growth.

And estate planning as well. You also unleash the value of your company that you have grown over the years by offering your shares to the public. Now let me go to an economic question. I understand that your father is one of our foremost economists, the first Director General of NEDA (National Economic Development Authority). Now, I’m going to ask the son, if you were to solve the poverty problem in the country, what would your top three priorities be?

Tough task!

  1. Government should spend a hefty part of its budget on infrastructure because this sector has the highest multiplier effect on investments and job creation. That’s important in inclusive growth.
  2. I’m more of the free market type, so deregulating more industries which I believe is the most efficient way to transmit resources to where they’re needed most, creating more jobs and opportunities.
  3. Continuous education starting from primary to secondary and tertiary. It’s important because an educated workforce will be able to contribute more.

You’ve lived almost half of your life abroad, is that why you have the “twang?” I’ve always wanted to ask you that.

No, it’s because of my mom. One of her interests when she was growing up was to DJ. She was also a stage actress. She enunciated and spoke extremely well. She was a political scientist by training. She passed away in 2010. 

Why did you come back to the Philippines?

I was working with Salomon Brothers (the predecessor of Citigroup) in the mid to late 90s. I went to the Board and presented why we should open up an office in the Philippines and volunteered to be the guy to be sent here. Fortunately, I got the approval. In my presentation, my boss said, “All your slides are graphs with growth opportunities, they’re all going upward. As we grant you this approval, I hope your revenue streams will look exactly like your graphs!”

So, did they?

I think we did pretty well and I’m very happy to have come back.

And we’re happy to have you here manning the Philippine Stock Exchange. Good luck to PSE, good luck to the Philippines! Thank you very much Hans.

At the end of the interview, he raises the book to say, “And please read this book!”

Again, thank you very much Hans, it’s good to have you back!

(Watch the full interview, click Rose Fres Fausto interviews Hans Sicat)