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INVESTING IN THESTOCK MARKET

Best Practices Forum SeriesApril 22, 2009

• Updates on the Stock Market

• Investing in stocks

• PSE initiatives

Presentation Outline

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Stock Market Performance

Performance of PSEi

Up by 42%

Up by 26%

Up by 15%

Up by 42%

Up by 21%

*as of April 17,

2009

Down by 48%

Up by 12%*

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Lehman Brothers and Merrill Lynch collapse, AIG bailed out by US government

Crisis low of 1,704.41 pts (10/28)

PSEi since the subprime crisis

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Rank IndexEnd-Dec

2008April 17,

2009YTD

Change1 Shenzhen Composite index 553.30 845.80 52.86%2 Shanghai Composite Index 1,820.81 2,503.94 37.52%3 Taiwan Taiex Index 4,591.22 5,755.38 25.36%4 Jakarta Composite Index 1,355.41 1,634.79 20.61%5 KOSPI Index 1,124.47 1,329.00 18.19%6 Nifty 2,959.15 3,384.40 14.37%7 Sensex 9,647.31 11,023.09 14.26%8 PSEi 1,872.85 2,094.13 11.82%9 Kuala Lumpur Composite Index 876.75 965.17 10.08%

10 Hang Seng Index 14,387.48 15,601.27 8.44%11 Straits Times Index 1,761.56 1,896.56 7.66%12 VN Index 315.62 334.14 5.87%13 SET Index 449.96 456.80 1.52%14 Nikkei 225 8,859.56 8,907.58 0.54%15 Topix Index 859.24 845.57 -1.59%


PSEi vs. other key Asian Stock Market indices

*DJIA down by 7.4% YTD

300

400

500

600

700

800

900

1,000

1,100

1,200

2-Jan-07 2-May-07 2-Sep-07 2-Jan-08 2-May-08 2-Sep-08 2-Jan-091,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

2-Jan-07 2-May-07 2-Sep-07 2-Jan-08 2-May-08 2-Sep-08 2-Jan-09

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200


1,050

1,200

1,350

1,500

1,650

1,800

1,950

2,100


2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000


600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600


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Stock Market Performance – Sector Level

Performance of Sector Indices (2007-April 17, 2009)

Up by 35% YTD

Financial Sector

Industrial Sector

Holding Firms Sector

Property Sector

Services Sector

Mining Sector

Up by 15% YTD

Up by 13% YTD

Up by 4% YTD

Up by 4% YTD

Up by 28% YTD

Up by 5% 2007

Down by 47% 2008

Up by 12% 2007

Down by 52% 2008

Up by 18% 2007

Down by 56% 2008

Up by 17% 2007

Down by 58% 2008

Up by 28% 2007

Down by 40% 2008

Up by 85% 2007

Down by 62% 2008

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Stock Market Indicators

Average daily value turnover (in Php billion)

Domestic Market Capitalization (in Php billion)

Total Capital Raised (in Php

billion)

1,313 1,629

2,130

3,352

4,252

2,474 2,751

-

1,000

2,000

3,000

4,000

5,000

2003 2004 2005 2006 2007 2008 Apr 142009

2,974

4,766

5,948

7,173 7,962

4,069 4,463

-

2,000

4,000

6,000

8,000

10,000

2003 2004 2005 2006 2007 2008 Apr 142009

0.59 0.84 1.56

2.32

5.48

3.11

1.99

-

1.0

2.0

3.0

4.0

5.0

6.0

2003 2004 2005 2006 2007 2008 Jan.-Apr.14 2009

Total Market Capitalization (in Php billion)

17.84 23.53

68.49 55.57

(22.16)(30)(20)(10)

-10 20 30 40 50 60 70 80

2004 2005 2006 2007 2008

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Net Foreign Transactions (in billion pesos)

Stock Market Indicators

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• Impact of the crisis in the broad economy- Job losses – unemployment up slightly to 7.7% (Jan. 09)

from 7.4% (Jan. 08)- Some foreign firms closing shop- Exports slowing down – down 40% first 2 months

• Government projects GDP growth of 3.1% to 4.1% in 2009

The market’s underlying economy

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• Local banks are highly capitalized• Fiscal measures for the past few years have allowed for

flexibility in spending• Gross international reserves are at an all-time high• Large dependence on domestic consumption• Inflation tapering off• Liquidity still growing• BPO and OFW provide various multiplier effects in the economy• Increased infrastructure spending• Resilience of OFWs

The market’s underlying economy

“The Philippines has a story to tell”

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Asian growth rates

Country 2007 20082009

ProjectionChina 13.00 9.00 7.00 Vietnam 8.48 6.23 4.50 Indonesia 6.28 6.06 3.60 Malaysia 6.30 4.60 (0.20) Philippines 7.20 4.60 2.50 Thailand 4.90 2.60 (2.00) Hong Kong 6.40 2.50 (2.00) Korea 5.00 2.50 (3.00) Singapore 7.80 1.10 (5.00) Taiwan 5.70 0.12 (4.00) Japan 2.40 (0.70) (3.50)

*2009 based on ADB forecasts as of March 2009

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Investing in the stock market

• There are about 400,000 accounts in the stock market, less than ½ of 1% of the country’s population- vs. other markets – 10 -30% of their population

invest in the stock market• Saving vs. Investing• Common misperceptions

- Rocket science- Entails huge investments

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The market as the barometer for economic performance

Positives- Economic growth- Low inflation - Low interest rates- Good employment figures- Good governance - Political stability

Negatives- Slow down in economic

activity- High inflation- Rising interest rates- Risk aversion- Declining world market- Governance concerns

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Market valuation as window to the performance of a company

Positives- Positive profits- Stable financials (good

return ratios)- Clear cut business plan- Regular dividend payments- Low P/E ratios- Practice of good corporate

governance

Negatives- Negative growth/equity- Leverage levels- Unclear business direction- No fundamentals- Poor investor relations

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Sector Financial Ratios

Price-Earnings (P/E) Ratio per Sector

Sector 2007 2008end-Mar

2009Financia ls Sector 17.17 11.92 11.58Industria l Sector 10.90 9.95 12.47Holding Fi rms Sector 12.51 7.49 8.02Property Sector 26.27 10.87 10.07Services Sector 17.05 10.22 12.31Mining & Oi l Sector 17.64 6.21 7.36Total Domestic Market 15.14 9.87 11.05

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Dividend Yield per Sector(in %)

Sector 2007 2008end-Mar

2009Financia ls Sector 1.44 3.92 3.55Industria l Sector 2.14 3.92 3.22Holding Fi rms Sector 1.20 2.94 2.46Property Sector 1.07 2.39 2.53Services Sector 4.10 8.74 9.00Mining & Oi l Sector 1.51 2.33 0.07Total Domestic Market 2.20 5.00 4.75

Sector Financial Ratios

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“It’s funny, the more I practice, the luckier I get. ”

- Gary Player


www.pse.com.ph

As of April 15, 2009

No. of listed companies: 246Market Capitalization: P4.43 trillionAve. Daily Value turnover: P1.99 billionTrading Participants: 184 (132 Active)

Manila Stock Exchange (1927)

Makati Stock Exchange

(1963)Merged in 1992

Provides platform for trading equity products, warrants, and deposit receipts

About the PSE

www.pse.com.ph

About the PSE

1927 1963 1994

1998 2001 2003 2004

The Manila Stock

Exchange, Inc. (MSE) was established

The Makati Stock

Exchange, Inc. (MkSE)

was organized

The SEC granted the PSE

its license to operate as a securities exchange

SEC conferred SRO status to

the PSE.

PSE was demutualize

d

PSE sold 16.5% of its authorized capital stock to

strategic investors thru

private placement.The SCCP

became a wholly-owned subsidiary of

PSEPSE Listed by way of

introduction

PSE Historical Time Line

1992

Makati Stock Exchange &

Manila Stock Exchange merged

to become PSE

2008

PSE declares

100% stock dividend

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Embarking on a new strategic agenda

“The investor of today does not profit from yesterday's growth. ”

- Warren Buffet

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STRATEGIC AGENDA

LEVEL

UP

ist more companies and securities xpand and educate the investor basealue and enforce corporate governance standardsnhance shareholder value

aunch new products and services

pgrade market infrastructure & human resourcesartner with government & other stakeholders

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• List more companies and securities- Liberalization of listing rules for mining companies- Help enforce laws requiring the public offering of shares of companies in various sectors such as

power, oil, utilities and telecommunications- Special tax incentives for newly-listed companies

Strategic Initiatives

• Expand and Educate Investor Base- 3-unit subject for college students (CMO 39)- Certified Securities Specialist Course (12-module

course) Short Course on Stock Market Investments – 3-day course

- Inclusion of stock market topics in High School curriculum

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• Value and Enforce Corporate Governance Standards

- Heightened enforcement of disclosure rules- 10-minute rule- Selective disclosure rule- Blackout rule

- Creation of Market Integrity Board- Institutionalization of the corporate governance

scorecard for publicly-listed companies

- Creation of a Special CG Segment in the PSE (funded by the UK government)

• Enhance Shareholder Value - Dividend policy by listed companies- Website publication of dividend pay-outs by listed

companies

- Corporate Governance Improvement Plan for the PSE -

- Extended trading hours- Office integration


• Launch new products and services- Securities Lending and Borrowing Program- REIT product- Exchange Traded Funds- Index futures and options- Commodities trading

• Upgrading Human and Physical Resources - New trading system - Enhanced Surveillance system


• Partner with government and other stakeholders- Personal Equity Retirement Account Act (PERA) –

enacted into law- Credit Information System Act (CISA) – enacted into law- Real Estate Investment Trust - passed by Senate- Abolition of DST on secondary trading – passed by the

House of Representatives on third and final reading- Corporate Recovery and Insolvency Act (CRIA) –

technical working group report done last Congress- Collective Investment Scheme Law (CISL) - technical

working group report done last Congress- ASEAN Collaboration - MOA signed with ASEAN

Exchanges

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“Fortune favors the brave.”-Virgil, Aeneid

THE PHILIPPINESTOCKEXCHANGE

Disclaimer: This presentation has been prepared by the Philippine Stock Exchange(PSE) for exclusive use of the party/ies to whom the presentation is being delivered. The PSE and its affiliates, officers, directors, employees and agents do not make representations or warranties, express or implied, on matters such as, but not limited to, the accuracy, timeliness, completeness, currentness, non-infringement, merchantability or fitness for any particular purpose of the information and data herein contained. The PSE assumes no legal liability and responsibility for any loss or damage arising from any decision made or action taken in reliance of information contained herein, or for the consequences of any errors or omissions, and does not represent that the use of information and date herein contained would not infringe privately owned rights. In no event shall the PSE or any of its affiliates, officers, directors, employees, or agents be liable for any loss or injury caused in whole or in part by contingencies beyond their control or negligence in procuring, compiling, interpreting, editing, writing, reporting, or delivering the contents of this presentation. The information contained herein is solely for information purposes only, does not constitute investment advice, and is not intended to influence investment decisions. Advice from a securities professional is strongly recommended before making any legal, financial, or other important decisions.

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