Asiamoney Brokers Poll 2017: Best local - Philippines
Deutsche Regis, voted best local brokerage in the Philippines in Asiamoney’s Brokers Poll 2017, enjoys the status of being both local and foreign thanks to its Deutsche Bank tie-up. Local management owns 51% of the firm and the German lender owns the rest.
The team has eight analysts and five sales, covering 42 stocks in the country. The team has been around a while – one of the sales staff has covered domestic clients since the 1990s.
The clientele, also as a result of the tie-up with a big international bank, is largely institutional, with little focus on retail business. That also affects the trading done by the firm, which goes against the Deutsche Bank balance sheet.
“I think it’s the best of both worlds, the JV structure gives us flexibility,” says Michael Macale, head of sales and trading at the firm.
While the firm benefits from its dual nature, it is now finding itself fending off not just the usual international competitors, but also home-grown brokerages that have been building up capabilities.
“We see more competition from them,” says Rafael Garchitorena, head of research and strategy at the firm. “They have become important players in the Philippines stock market.” That, combined with competition from passive funds and low-touch trading, has put pressure on pricing. But the firm has tried to keep a stable team.
“The core has been with the firm since at least the early 2000s,” adds Garchitorena. “With only a few exceptions, the rest of the team has been with us at least five to 10 years.”
The Philippine stock market has not offered much joy in 2017: a weak peso and index performance have both disappointed investors.
While that has been the case for a number of years, brokerages are also having to face falling trading turnover; average daily volumes are down by half from a few years ago to around $140 million, the firm notes.
“It’s been six years of frustration,” says Garchitorena. “With the strong economic growth that the country is printing, overall earnings growth in index names has been stuck in single digits for the past few years, which is unusual.”
That has been driven by factors such as intense competition within individual sectors, driving down corporate margins, with the sole exception of the banking sector. The property sector may provide a bright spot for the year ahead, driven by the growth of the Philippines Offshore Gaming Operators (Pogos), which will see growing need for office space around the country.As for the composition of the market, while trading activity overall is split evenly between local and foreign investors, foreign-linked firms such as Deutsche Regis see around two thirds of business already coming from abroad and do not expect that proportion to change.