Category Archives: Stocks

ETFs in Philippines versus Thailand and Vietnam

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FMETF is currently the only exchange-traded fund (ETF) available in the Philippine Stock Exchange. FMETF was launched in 2013 and aims to track the performance of the PSE Composite Index (PSEI), which tracks 30 companies in the Philippine Stock Exchange.

As of November 4, 2019, FMETF’s total assets is PHP  1,680,365,665.87 or about $33.3 million. In comparison, the total PSEi market capitalization is PHP 10,073,517,502,927.30 or about $199.4 billion. So, FMETF’s market cap is 0.0167% of that of the PSEi, six years after it was first introduced. And again in that span of time, no other ETF was introduced in the market.

I was curious how ETFs in a neighboring countries fare. The Stock Exchange of Thailand (SET) has a quite a few ETFs available. The TDEX ETF introduced in 2007 tracks the SET50 index, and the ETF has total assets of $3.1 billion compared to SET50 capitalization of  $388 billion. TDEX’s market cap is about 0.8% of that of the SET50 index. Keep in mind that there several ETFs in the Thailand market, some covering the larger SET100 and quite a few covering specific sectors. Needless to say, the Thai stock market is larger than the Philippine market.

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Tax-loss harvesting in the Philippine stock market?

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In the US, losses incurred from selling stocks from losing investments can be used to lower capital gains from winning trades.Short-term capital gains are taxed as though they are ordinary income which is taxed based on a progressive tax table. Near the end of the year, if you already have realized some gains (that you’ll have to pay taxes on) and are still holding on to some losing positions, you may decide to cut your losses and sell your losing stock positions. This will allow you to harvest losses to offset some of your gains, thereby reducing taxes that you’ll have to pay. If you don’t have any gains to offset, you can also reduce your ordinary income (wages, etc.) by up to $3,000 of your losses. In a way, this may encourage you to stop holding to that losing stock and cut your losses, and also reduce your tax bill. On the other hand, the stock might recover and you’ll miss out on it. You’re not allowed to buy the stock again within 30 days of selling it, and still be able to harvest the loss, because of wash sale rules.

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Opening a Charles Schwab Brokerage Account from the Philippines

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In the process of moving from the US back home to the Philippines, I had to make certain arrangements with regard to my financial assets in the US. I maintained taxable equity accounts with Wealthfront and Robinhood, both of which do not cater to non-resident aliens. While I was a “resident alien for tax purposes” while I was living in the US, I am now properly classified as a non-resident alien after returning to the Philippines.

Many such brokerages in the US do not cater to non-resident aliens and even US citizens living abroad because there are a lot of regulations to comply with (FATCA, among others). Fortunately, the bigger online brokers like Charles Schwab, TD Ameritrade, and Interactive Brokers do make their services available to non-resident aliens.

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Costs of stock trading in the Philippines

Personal Finance, Stocks

Having been used to the mechanics of trading stocks in the US stock market, there’s a bit of a learning curve in understanding how trading stocks in the Philippine Stock Exchange works.

The first major difference is with regards to online broker commissions. In the US, flat-rate commissions typically ranging from $4.95 to $7.95 have been commonplace for the past several years. These were paid for each buy and sell transaction regardless of transaction size. Zero-free commissions were popularized by Robinhood. In October 2019, more established brokers like Charles Schwab, TD Ameritrade, E*TRADE, and others followed suit by reducing their commissions to zero. So it’s now practically free to trade stocks in the US stock market. You’ll just have to take care of paying capital gains taxes when you file your tax return.

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