FMETF - The First Ever ETF in the Philippines

Finally, the first ever ETF in the Philippines has arrived. First Metro’s ETF was listed last December 2, 2013 at Philippine Stock Exchange.

It’s ticker in the Philippine Stock Exchange is FMETF. It will be officially called First Metro Philippine Equity Exchange Traded Fund Inc.

ETF means Exchange Traded Fund. From the word itself, it is a fund being traded in the exchange. To be more specific it is an equity fund being traded in the Philippine Stock Exchange (PSE).

Historically, PSE only has companies like PLDT, Globe, BPI, MBT, Ayala Land, Etc. on its list of stocks traded in the exchange. Now, for the first time it includes an ETF as tradable in the exchange.

From here on, aside from seeing the usual tickers like BPI, MBT, TEL, GLO, ALI, etc. you’ll also see the ticker FMETF in the ticker tape. Yes, this ETF is being bought and sold just like a normal listed company.

FMETF is expected to replicate or mimic the PSEi as closely as possible. 

If PSEi goes down, FMETF NAVps should go down also. On the other hand, if PSEi goes up, NAVps should go up also. It doesn’t intend to be defensive during market declines or to outperform the Index.

The strategy is to invest on PSEi stocks with approximately the same weights as in the PSEi.

There are 30 stocks in the PSEi. The total market capitalization is 2.5 trillion pesos.

PLDT’s share of that market capitalization is 11.26%, SM 9.84%, ALI 7.51% and so on and so forth.  Now, FMETF is going to invest its fund in the same weights as the PSEi.

The fund shall invest 11.26% on PLDT, SM 9.84%, and ALI 7.51% and so on and so forth.

In this strategy, the fund is going to imitate the behavior of the PSEi; hence its NAVps shall considerably replicate PSEi returns.

In fact, when you draw a chart of FMETF, the graph will resemble almost exactly as that of PSEi.

Again, FMETF objective is not to be defensive during market declines or to outperform the market but rather to replicate the behavior of PSEi. If PSEi returns are high, FMETF returns should also be high.

The fund however cannot exactly match the behavior of PSEi. Trading and management costs will affect the NAVps. Additionally, changes in PSEi composition and diminishing liquidity may affect the NAVps and increase the tracking error slightly.

Overall, the fund expects the maximum deviation from PSEi at 5% against its NAV.

1	PHILIPPINE LONG DISTANCE TELEPHONE COMPANY "Common"	TEL	282,168,843,456	11.26
2	SM INVESTMENTS CORPORATION	SM	246,525,894,720	9.84
3	AYALA LAND, INC.	ALI	188,150,379,774	7.51
4	BANK OF THE PHILIPPINE ISLANDS	BPI	152,105,353,582	6.07
5	ABOITIZ EQUITY VENTURES, INC.	AEV	133,507,816,930	5.33
6	AYALA CORPORATION	AC	131,201,830,656	5.24
7	SM PRIME HOLDINGS, INC.	SMPH	130,519,963,196	5.21
8	BDO UNIBANK, INC.	BDO	110,555,944,946	4.41
9	INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.	ICT	105,389,876,494	4.21
10	UNIVERSAL ROBINA CORPORATION	URC	101,668,897,603	4.06
11	ALLIANCE GLOBAL GROUP, INC.	AGI	101,055,107,323	4.03
12	METROPOLITAN BANK & TRUST COMPANY	MBT	100,131,715,337	4
13	JG SUMMIT HOLDINGS, INC.	JGS	88,472,752,441	3.53
14	JOLLIBEE FOODS CORPORATION	JFC	70,718,194,512	2.82
15	METRO PACIFIC INVESTMENTS CORPORATION	MPI	53,018,331,178	2.12
16	GT CAPITAL HOLDINGS, INC.	GTCAP	52,290,000,000	2.09
17	ABOITIZ POWER CORP.	AP	48,566,788,446	1.94
18	GLOBE TELECOM, INC.	GLO	46,669,155,200	1.86
19	ENERGY DEVELOPMENT (EDC) CORPORATION	EDC	45,187,500,000	1.8
20	LT Group, Inc.	LTG	43,610,197,236	1.74
21	DMCI HOLDINGS, INC.	DMC	41,080,492,180	1.64
22	MEGAWORLD CORPORATION	MEG	38,203,981,542	1.53
23	ROBINSONS LAND CORPORATION	RLC	32,889,835,741	1.31
24	MANILA WATER COMPANY, INC.	MWC	29,704,905,011	1.19
25	SEMIRARA MINING CORPORATION	SCC	29,625,750,000	1.18
26	BLOOMBERRY RESORTS CORPORATION	BLOOM	27,842,703,625	1.11
27	SAN MIGUEL CORPORATION	SMC	23,510,748,885	0.94
28	PETRON CORPORATION	PCOR	22,504,000,842	0.9
29	FIRST GEN CORPORATION	FGEN	14,144,584,575	0.56
30	PHILEX MINING CORPORATION	PX	14,141,531,542	0.56
	TOTAL		2,505,163,076,973	99.99

 Source: Pse

As part of its reportorial requirements with PSE, FMETF is required to disclose its Net Asset Value per share (NAVps) every day.

This daily disclosure is important because it discloses the NAVps and the tracking error of the ETF.

Since FMETF is a listed fund, investors buy and sell shares of FMETF that do not correspond to the NAVps of the fund. For example, on December 6, 2013 the NAV per share of FMETF is 96.15 (see below PSE screen grab). The closing price of FMETF on same date is 97.15. There was a difference of 1 peso.

FMETF is good especially for investors who wants an exposure in the stock market but doesn’t want to invest in individual stocks. Since FMETF is required to buy a basket of stocks listed in PSEi, a single company cannot bring your investment considerably down.

FMETF offers exposure to various blue-chip companies. Imagine going to the supermarket, filling up your trolley with TEL, SM, ALI, BPI, etc, queuing at the counter, and paying your ‘grocery’ in a single transaction.

Since FMETF is listed in the PSEi, it trades like a stock and you can see the daily change in its NAVps.