Major Philippine banks prepare to offer ETFs

Top three banks prepare for their offerings.

Metropolitan Bank and Trust Company, the Philippines’ second largest bank, will provide a seed capital of US$6 million for its exchange traded fund or ETF. The ETF will be offered through First Metro Investment Corporation (FMIC), Metrobank’s investment banking arm.

Banco de Oro Unibank, the largest Philippine bank, and Bank of the Philippine Islands (the third largest bank) were also preparing to offer ETFs, said Philippine Stock Exchange President Hans Sicat.

Sicat also said that Deutsche Bank was also interested in sponsoring an ETF that will track the MSCI Philippines Investable Market Index to be listed on the Philippine Stock Exchange.

FMIC has received board approval to set up the ETF. Metrobank’s mutual fund management arm, First Metro Management Inc., will manage the ETF.

An ETF is an investment fund traded on stock exchanges, much like stocks. It holds assets such as stocks, commodities or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index.

The Securities and Exchange Commission recently approved the regulatory framework for the offering ETFs. SEC rules and regulations classify an ETF as a new investment product that is similar to a mutual fund but with distinct characteristics.

The proposed rules mandate that an ETF have a minimum paid-up capital of US$4.9 million while all shares must be common voting and redeemable in creation units.