I’ve always liked using ATMs from HSBC Philippines because they don’t charge exorbitant fees for withdrawals using international ATM cards. ATMs from Philippine banks typically charge PHP 200-250 ($4-5). HSBC ATMs also have high withdrawal limits. When I use my Charles Schwab or Capital One 360 ATM card, I usually withdraw PHP 25,000. When I tried to do just that today, I was greeted with the message that the ATM now has a limit of PHP 10,000. I didn’t try to make any additional withdrawal so I don’t know if that’s just a per-withdrawal limit or a daily limit. There goes one advantage of HSBC ATMs.
This interesting article from Victor Haghani and James White suggests that, given some initial assumptions about investor wealth distribution, the dominant size of the U.S. market (50%) relative to the world market coupled with U.S. home-country bias (80% invested in domestic equities) actually gives rise to higher U.S. market valuations, and lower expected long-term returns. This is the case in spite of the fact that smaller market investors exhibit relatively higher home-country bias (50% invested in domestic equities in markets 5% the size of the world market cap).
How would this apply to countries with extreme home-country bias like the Philippines? If we have a total world market worth $100, with a 50% US market with 80% home-country bias, 10 smaller 4.9% markets with 50% home bias, and a 1% Philippine market with 99% home bias, the calculation would yield that there would be an excess $0.45 demand in a Philippine market that would otherwise have been worth only $1. It would appear that extreme home-country bias in such a small market like the Philippines also has the effect of pushing market valuations higher due to increased demand.
Read Global Impact of Investor Home Country Bias for more discussion on Haghani and White’s article.
For Philippine residents who want to venture into the international stock market, there are really just a few legitimate options available. For this matter, I don’t consider the likes of eToro and Abra as legitimate platforms for the serious investor or trader. The top three choices for Philippine residents are Charles Schwab, TD Ameritrade, and Interactive Brokers (IBKR). Since Charles Schwab is acquiring TD Ameritrade, I’m only covering Schwab and IBKR. So which one is better for Philippine residents?
(Note that if you’re a Philippine resident and also an American citizen, many of the issues raised here are not applicable to you.)Continue reading Best international broker for Philippine residents: Charles Schwab vs Interactive Brokers
In my post on avoiding home-country bias in the Philippines, I mentioned the BPI Invest Global Equity Fund-of-Funds UITF (BPIGLBL:PM) as one of the options in diversifying into international stocks. This fund aims to “provide excess return” over its benchmark, the MSCI World Index, which covers international developed markets.
In June 2019, a number of news articles came out saying that the BPI fund has exceeded $100M in assets, and is now the largest of its kind in the Philippines:
- BPI Global Equity Fund tops $100 M, PH’s largest
- BPI AMTC’s UITF surpasses $100M in assets under management in Q1
- BPI AMTC global fund breaches $100M
These articles also mention BPI’s claims that its fund has consistently outperformed the benchmark MSCI World Index: “It overtook the returns registered by MSCI World Index – comprised of large and mid-cap equities of 23 developed markets such as United States of America, United Kingdom, Japan, Hong Kong, and Singapore – by 0.94% (year-to-date)to 2.58% (two-years) as of the first quarter of 2019.” This is a pretty bold and impressive claim. But is it true?Continue reading Is BPI Invest Global Equity Fund-of-Funds UITF really outperforming its MSCI World benchmark?
In the Philippines, investment fund fees disclosed in a fund’s fact sheet or prospectus typically include trust/management, custodianship, and auditor fees. The fees are a percentage of a fund’s assets under management (AUM). Funds normally have other expenses that are not covered by these fees. Unfortunately, I have not seen any fund honestly disclose its total expense ratio (TER) or ongoing charges figure (OCF) which represent the fund’s total actual cost to the investor. For example, the total expense ratio of the country’s only ETF appear to reach at least 0.8% compared to the fund’s stated fee of 0.50% as discussed in the post: The true costs of FMETF.
Since the funds don’t disclose their TER, it’s always interesting for me to learn about what other expenses these funds may have that are not explicitly stated in the prospectus. I just read from a year-old news article that this year, the PSE has started charging a 0.03% index licensing fee to funds that explicitly mirror the PSE Composite Index (PSEi). As with other fees, this index licensing fee is based on a fund’s AUM. It is said to affect about 15 funds. That number more or less matches the funds listed in uitf.com.ph and pifa.com.ph that track the PSEi.Continue reading The PSE may be taking a small cut from your PSEi index fund.
I’ve discussed the important IRS tax issues when investing in the US as a non-resident alien from the Philippines in a previous post. I’ll repeat some of them here in discussing the known ways of lowering or avoiding altogether some of these US taxes.Continue reading How to pay lower US taxes on US investments as a non-resident alien from the Philippines
FMETF is the only ETF available in the Philippines. It tracks the 30-component PSEi. In a previous post, I noted that FMETF is a de facto accumulating ETF, since it has never distributed any cash dividends, in spite of its declared intention to do so.Continue reading Discrepancies in FMETF split-adjusted price history
The Philippines has only one available ETF in the market: the pioneering First Metro ETF (FMETF) which aims to the track the PSE Composite Index (PSEi).
When an ETF receives dividends from corporations whose shares it owns, it can either reinvest those dividends within the fund (accumulating ETF), or distribute the dividends to ETF shareholders (distributing ETF). So under which category does FMETF fall?Continue reading Is FMETF an accumulating ETF or a distributing ETF?
Home-country bias is the tendency of an investor to over-invest in his/her country’s domestic equity market in a scale that significantly exceeds the proportion of the size of the domestic market relative to the rest of the world.
Considering that even Americans, whose own stock market is 40% to 50% of the world market, can be guilty of home-country bias, it is not a surprise that investors from much smaller markets like the Philippines also exhibit this behavior. This is shown in the chart below, which visualizes data collected by Sercu and Vanpée from CPIS (December 2005) and World Federation of Exchanges, in their paper, Home bias in international equity portfolios: a review. When that paper was published, Filipinos’ equity portfolios were 99.5% domestic while the domestic market was just 0.1% of the world market cap.Continue reading Avoiding home-country bias in the Philippines
I have just started to read about PERA retirement accounts that have been recently made available to Filipino workers, including those working abroad. There have already been many articles written about PERA all over the web so I won’t bother with all the nitty-gritty details. You can read a good introduction on PERA from Katie Scarlett Needs Money.
PERA stands for Personal Equity and Retirement Account. They are often described as the Philippine version of American retirement accounts like 401(k) and traditional IRA accounts. I still have my own 401(k) and traditional IRA accounts from my time working in the U.S. so I find these comparisons interesting. In this post, I’d like to explore these comparisons in more detail.Continue reading Thoughts on PERA in comparison to US retirement accounts