The New Trading Platform Of The Philippine Stock Exchange

``There’s a simple and elegant test of whether there is skill in an activity: ask whether you can lose on purpose. If you can’t lose on purpose, or if it’s really hard, luck likely dominates that activity. If it’s easy to lose on purpose, skill is more important.” Michael J. Mauboussin

Mayhem struck the Philippine Stock Exchange (PSE), this week. What was expected to be a smooth transition in the migration of the old MakTrade system to the New Trading System turned out to be quite messy.

Aside from the erroneous data feed which resulted to a whopping one day 14% jump in the Phisix on the first day of the new system, news reports say that it took more than three hours[1] to correct the figures in the benchmark index.

The glitch wasn’t just seen in the major benchmark figures. This extends all the way to the data, particularly on the daily quotes. Previous computations for foreign trade seem to have been altered, so as with the breadth (daily number of issues traded-formerly sum of advance, decline and unchanged issues), this I would have to clarify with the PSE.

So unless the PSE resolves to align this week’s quote with the past, the new system will render our previous data as invalid.

Though this is a technical issue which eventually should be resolved, I am not sure how the PSE will make good the right adjustments, considering that it could be costly to reprogram (if this is included in the package).

In addition, the posting of the daily quotes at the PSE website has been way delayed. The quote for July 30^th trading session had been uploaded only this morning, August 1^st.

The Unseen Cost Of Inefficiencies

Meanwhile, a PSE official, quoted by media, rushed to exculpate the disorderly transition by insensibly claiming that such transition represents as a mere “minor” issue and emblematic of normal “birth pains”. This is not only ridiculous, but is unwarranted.

Such statement exemplifies on what we call as the stakeholder’s problem—where the urgency to know and act is fundamentally based on the perceived stake by the agent involved.

In this case, because the officer’s stake isn’t in the trading business, but as an employee of the PSE, his sentiment reveals of the seeming paucity in the urgency to patch up the system, as well as, the undeserved insensate remarks.

One should realize that distortions in the price signals engender imbalances in the capital markets.

This includes an increase in the perception of operational uncertainty which could result to heightened volatility, the expanded risk premium of holding local equities relative to other local and foreign assets, higher cost of transactions and a higher hurdle rate required by both local and foreign institutional investors for them to consider allocating their funds to Philippine equities.

In short, uncertainty translates to the risks of lesser investments!

Proof of this is that even if the Phisix bellwether did register a marginal gain this week, the average volume fell by 13% (Php 2.9 billion) and the average number of daily trades fell by 23%!

So when we are talking of billions of pesos per day (estimated at Php 3 billion or US $66 million), “minor” problems and “birth pangs” translate to Php 100 millions+ (US $2.2 million) lost in daily transactions. Think of all the multiplier effect from the lost transactions applied to the participants and to the PSE itself.

Figure 1: Bloomberg: Year To Date Performance Of The ASEAN 4

I would even suggest that the underperformance of the Phisix relative to our ASEAN neighbours amidst a seemingly sprightly market backdrop (see figure 1) could signify as the unseen ‘negative’ ramifications from the “birth pains” (see blue circle).

Except for Malaysia (orange), all three major ASEAN bourses have broken above the 2010 resistance levels, and this includes the Philippine Phisix (green). However the rally in the Phisix appears to have stalled while the others persisted.

So the lost opportunities in terms of trading volume and a higher Phisix level could have been the side effect of the unwieldy migration to the new system.

New Trading System Positioned For Derivatives Markets

The New Trading System (NTS) reportedly cost a staggering Php 197.39 million[2] (US $4.32 million-current exchange rate) whose trading platform is supposedly designed from one of the world’s largest stock market companies. According to the Inquirer.net[3],

``trading software product developed by NYSE Technologies SAS, the commercial technology unit of NYSE Euronext, which in turn operates the largest exchanges around the world including the New York Stock Exchange and Euronext.”

By concept, the NTS or the new platform seems promising, primarily because it is supposedly a system that would also service “cash, debt and derivative instruments”.

Among the major ASEAN bourses, the Philippines is a laggard in the derivatives markets as we have yet to implement one through the local stock exchange. Hence, the understandable shift to incorporate a trading platform that would allow for this expansion.

In other words, the New Trading System (NTS) is meant to position for a derivatives exchange market and not just the stock exchange.

By allowing investors the instrument to hedge, which is the main function of derivatives, this facility could enhance investor returns, which should ultimately attract more public participation.

Figure 2: Manila Bulletin: NTS Revised Ticker and Board Lot

There are many salient trading enhancements in the new program. This includes the adoption of a reduced tick size (price fluctuation) and board lot[4] (see figure 2); real-time monitoring of foreign ownership; new order and validity types; and the standardization of the account code[5].

I think some of the most noteworthy, among the many supposed new functions[6], that could be widely used are the following:

-stop order which consists of the stop-loss [order that is queued as a must be filled as soon as the trigger price is reached] and the stop limit [order that is queued as a limit order as soon as the trigger limit price is reached]

-market order [order that is filled irrespective of the price whereby the unfilled quantity will be queued into the order book.]

-market to limit order [order executed at the best opposite price for shares whatever is available; remaining unfilled quantity will be put in the order book at the execution price]

-good till date [order remains valid until the date specified by the user]

So in my view, the transition towards NTS, given the specified features, should extrapolate to a medium to long term advantage, if the PSE would use this platform to expand into financial derivatives, and most importantly, to the much needed commodity futures market.

As a side note, because of the dire lack of capital in the Philippines, despite being a relatively low wage low export country, a large part of the Philippine economy remains mired in the agricultural age. Thus, a commodity futures market should enhance pricing, logistics and distributional efficiency that should positively impact our farmers, as I have long been arguing[7] for.

In short, since I am not a Luddite (political zombies who are afraid of technological adaption), but one who embraces innovation, the NTS, based on its current features, looks enticingly positive.

How Competition Can Improve On The PSE

However, what I have cavilled about is the executional inefficiencies and the lack of sensitivity by the PSE in the migration process.

The PSE should have backtested the new platform with the MakTrade system into near precision first before formally replacing the latter that would have resulted to an orderly transition.

Birth pains serve as no justification in today’s transition towards the information age. Yet if such reasoning holds true, then technology ‘birth pangs’ should translate into catastrophic crashes for the new airplane models as the Boeing’s 787 Dreamliner and the Airbus 380. Such rationalization is effectively a non-sequitur.

Instead, what these shortcomings manifest are symptoms of companies operating, outside of the discipline of consumers (or shareholders in this setting) in a monopolistic environment, which technically is what the Philippine Stock Exchange is.

As Professor Murray N Rothbard explained[8] (bold emphasis added, italics- Professor Rothbard)

``One form of partial product prohibition is to forbid all but certain selected firms from selling a particular product. Such partial exclusion means that these firms are granted a special privilege by the government. If such a grant is given to one person or firm, we may call it a monopoly grant; if to several persons or firms, it is a quasi-monopoly grant. Both types of grant may be called monopolistic. An example of this type of grant is licensing, where all those to whom the government refuses to give or sell a license are prevented from pursuing the trade or business.

``It is obvious that a monopolistic grant directly and immediately benefits the monopolist or quasi monopolist, whose competitors are debarred by violence from entering the field. It is also evident that would-be competitors are injured and are forced to accept lower remuneration in less efficient and value-productive fields. It is also patently clear that the consumers are injured, for they are prevented from purchasing products from competitors whom they would freely prefer. And this injury takes place, it should be noted, apart from any effect of the grant on prices.”

And according to former PSE President Jose Yulo Jr.[9]

``On March 4, 1994 the Securities and Exchange Commission granted the Philippine Stock Exchange, Inc. its license to operate as a securities exchange in the country stating that “a unified Stock Exchange is vital in developing a strong capital market and a sustainable economic growth.” It simultaneously canceled the licenses of the MSE and the MKSE.

``The Philippine Stock Exchange is currently the only organized exchange in the Philippines licensed for trading stocks and warrants.” (emphasis added)

So while it is true that stock exchanges of Thailand, Malaysia, Taiwan and Korea are monopolies in a sense (all others have multiple stock exchanges[10] including Pakistan), we see these organizations as more sensitive to the interest of the shareholders due to a deeper penetration level which make them a lot more efficient than the local contemporary.

That’s because shareholders exert pressure on listed companies as well as through the stock exchanges in terms of participation and through shareholder activism—or the use of equity stake to influence corporate management.

And a deep penetration level of shareholder’s base would naturally impact the way the exchange business are operated.

Besides, since the Philippines has a minute shareholder base[11] (less than 1% of the population direct and indirect) and whose listed companies are mostly companies owned by local tycoons, the lack of minority shareholder activism is one of the contributing factor that accentuates the negative dynamics of the monopolistic structure.

Figure 3: ADB[12]: Average Foreign Holdings of Equity—2003 to 2007 and 2008 (as % of market capitalization)

Another possible variable is the competition to attract foreign investors (see figure 3).

As one would note, except for Malaysia, the other monopolist Korea, Taipei and Thailand comprise the largest in terms of the average share of foreign participation as a percentage of the market capitalization.

This means that the respective markets are seen as highly liquid or has deep public participation levels, are considered sophisticated and shareholder friendly enough to generate large following from foreign funds.

Thus, inefficient management of the trading platform will curtail the interest of foreign investors to the detriment of the economy (lack of avenues to intermediate savings and investment) and to the investment public (returns relative risks).

So the PSE management should not only look slough off the monopolistic attitude, and on the competitive side work to attract investors by having more efficient implementation and a stable upkeep of the trading platform, but likewise have a PR communiqué that won’t be seen as snooty.

As a long time shareholder of the company, which is my expression of optimism for the Phisix and for the domestic capital markets, I hope that this critique would be deemed as constructive enough to make the PSE a more shareholder (market) friendly institution.

---

[1] Inquirer.net, New system throws Philippine bourse into disarray, July 27, 2010

[2] Philippine Stock Exchange, Security Exchange Commission Form 17-A, May 17, 2010

[3] Inquirer.net, loc. sit.

[4] Manila Bulletin, PSE implements new trading system, July 25, 2010

[5] Business Mirror, SEC approves PSE shift to new trading system, April 26, 2010

[6] Philippine Stock Exchange, NTS Update Session 1, October 2008

[7] See A Prospective Boom in Philippine Agriculture! and see Rice Crisis: The Superman Effect And Modern Agriculture

[8] Rothbard, Murray N. Triangular Intervention: Product Control, Man Economy & State Chapter 12

[9] Yulo, Jose Luis U. Jr. Knowing The Philippine Stock Exchange A guide for Investors

[10] tdd.lt Stock Exchanges Worldwide Links

[11] Philippine Stock Exchange, Less than half of 1% of Filipinos invest in stock market, PSE study confirms, June 16, 2008

[12] Asian Development Bank, Asia Capital Markets, May 2010

Quote of the Day: Mark Mobius On Shareholder Activism

Words of wisdom from Templeton's chief honcho, Mark Mobius, (bold highlights mine)

``Shareholder activism is not a privilege – it is a right and a responsibility. When we invest in a company, we own part of that company and we are partly responsible for how that company progresses. If we believe there is something going wrong with the company, then we, as shareholders, must become active and vocal.

``However, most minority shareholders tend not to be very active. One of the biggest reasons for their reluctance is that it can take a lot of time and effort, and sometimes money too, to persuade management to change. To become a strong activist, one may need to hire lawyers, which could become quite expensive. Shareholders often find that it is much easier to simply sell their position in a company that they feel is going in the wrong direction. If enough shareholders sell out, and the share price drops, the company’s management may realize that their actions are not welcomed by the market, and they may retrace these actions. However, even if a share sell-off engenders change (which itself is unlikely), the change usually comes too late for those shareholders that have already sold out. In the long term, trading in and out of a company’s shares could present a costlier and more time-consuming strategy than simply exercising your rights as a shareholder.

``We pursue shareholder activism in varying degrees of intensity. Our initial step is usually to communicate with the company’s management and directors to express our concerns and begin a dialogue. Often, that is enough. If that does not work, then more aggressive action, such as voting out the directors, may be needed. However, the latter requires many investors to get together and express the same concerns. Deciding when and if we might consider taking a shareholder activist position must be carefully weighed against how much we have invested in the company and whether we think taking aggressive action has a good chance of success to warrant the necessary time and money involved."

In my view, shareholder activism is one great way to professionalize the equity markets. Ideally, this should lead to more investment flows and a longer term orientation for stakeholders. However, other forces such as inflationism tend to distort the way investors make decisions based on false signals. Nevertheless, shareholder activism is a bottom-approach in dealing with the development of the local equity markets.

Bubble Thoughts Over Meralco’s Bubble

``The lies the government and media tell are amplifications of the lies we tell ourselves. To stop being conned, stop conning yourself.”-James Wolcott, American Journalist

Meralco is in the spotlight anew.

The country’s premier utility firm, which holds the exclusive franchise for the electricity distribution for the National Capital Region (NCR), caught the public’s attention following a spectacular record romp by its share prices.

And last week’s parabolic vertiginous ride appears to have been playing out the blowoff phase of a conventional bubble cycle. (see Figure 1)

Figure 1: Bubble cycle (left) and Meralco (black candle right)

Importantly, like typical bubbles, the culmination of which can be identified by delusional rationalizations aided by experts exacerbated by media- Meralco’s skyrocketing price has been attributed to speculations on a prospective ‘tender offer’ (Bloomberg)!

Allegedly one of the titans involved [see King Kong Versus Godzilla at the PSE; Where Politics Trumps Markets] in the drama of the recent corporate joust has acquiesced to a purchase price of Php 300 per share which would require a mandated offering to minority stockholders!

Yet rising prices and some special trades (block sales and cross trades) have been used as signs to confirm on such myths.

Why do we think all these rationalizations seem ridiculous?

Simply said, because logical reasoning has been totally thrown out of the window!

As financial writer and investment speaker Joe Granville warned, ``the media is the biggest enemy of the small investor, mostly headlining the wrong news at the wrong times, playing on his misguided reliance on fundamentals and his normal fears and greeds.”

Putting A Perspective On Meralco’s Price And Corporate Disconnect

To put on some level headed perspective we will deal with some key issues.

First, on a year to date basis, despite the recent turbocharged upsurge, Meralco hasn’t been the only leader with 284.87% of gains (as of Friday’s close).

Other issues like Phisix component mining giant Lepanto Consolidate (+271.43%) and Business Process Outsourcing Paxys (+358.33%) have seen the similar or greater level of share price action as seen in the above chart represented by the green and red lines respectively.

As an aside, I wouldn’t suggest that the latter two would seem in a bubble considering the U-shaped recovery vis-à-vis Meralco’s actions which appear to have replicated the motions of a bubble paradigm as shown in the chart.

Although from a trough to peak basis, Meralco, hands down based from last year, does hold the tiara for market outperformance (700%).

Nonetheless, one must be reminded that past performances are not indicative of future outcomes.

Two, Meralco’s share in the Phisix has now jumped to 7.7% from less than 1%, as we similarly pointed out in Beware Of The Brewing Meralco Bubble!, and now holds the second spot after PLDT in terms of free floated market cap.

This for a company whose profits are constrained by political forces! (see below)

Meralco has effectively, leapfrogged over former heavyweights Ayala Corp, Bank of the Philippines, Globe Telecoms, Ayala Land and SM Investments.

With Meralco’s share of the Phisix gaining more weight, any ensuing volatility from its share prices will likely be reflective on the directions of the Philippine benchmark unless counterweighted by the lagging erstwhile behemoths.

Three, financial valuations, if any of these apply at all, have ENTIRELY been jettisoned for wanton speculations and nonsensical justifications.

As we discussed in Meralco’s Run Reflects On The Philippine Political Economy, the share price movements in the local markets hardly reflects on corporate fundamentals.

The first three factors cited above have clearly been validating our Livermore-Machlup model where Philippine equities move in tidal fashion underpinned by liquidity or loose monetary landscape.

This climate essentially begets a predominant horse racing outlook or mentality, where canards touted as facts mostly emanating from the foibles of cognitive biases.

In short, NO liquidity from loose monetary policies equals NO bubbles, and all the rest are simply footnotes.

As writer Peter McWilliams warned (bold highlights mine), ``The media tends to report rumors, speculations, and projections as facts... How does the media do this? By quoting some "expert"... you can always find some expert who will say something hopelessly hopeless about anything..” Indeed.

Fourth, common sense should dictate to us that perhaps none of these engaged (supposedly cunning and astute) Taipans, whom have built their wealth and “credibility” over the years, would likely pay for excessively or overpriced assets, unless they have other undeclared agenda in mind, which are exclusive of profits meant for the institutions which they represent.

Yet, any outrageous and reckless acquisitions, that would put at risk the interests of such institutions involved, could provoke a minority shareholder revolt. That’s assuming shareholder activism is alive here. Nevertheless, even in the absence of it, we should expect the minority foreign shareholders to vote with their feet.

In short, the supposed buyout, from the alleged stratospheric levels, signifies as tremendous costs to the interests of the company they represent from both the majority and minority stakeholders’ perspectives.

Needless to say, the present day hysteria from rising share prices is temporal in nature and subject to market cycles and does NOT represent the underlying fundamentals. Unless people think that these tycoons are dimwits, I would bet on the opposite…that the so called godfathers involved are cognizant of this!

Fifth, even if the so called buyout does occur, it is less likely that such deal would be consummated in transparency or reflective of market conditions.

These titans could have such transaction wrapped up much earlier than known by the public, or have done so with attendant compromises such as rebates et.al., and could use recent actions as a partial exit point to profit from today’s insanity.

Lastly, as we have been repeatedly arguing, the Meralco brouhaha is beyond the sphere of normal financial analysis because it is a POLITICAL SENSITIVE public listed company.

You can’t just attribute earnings without comprehending on the business model from which the company operates on.

Besides, here, the interests of the owners under the said platform are divergent from the interest of the minority shareholders.

Here is why.

Meralco’s Business Model: From RORB TO PBR

Lately, Meralco’s business model has shifted from Rate of Return Based (RORB) to Performance Based Rating (PBR).

According to GMANews.tv, ``The new PBR scheme also replaces the return on rate base (RORB) formula, which charges customers for using Meralco assets — including posts and cables — in bringing electricity to its end-users.

``Under the RORB, public utilities such as Meralco are disallowed from charging rates exceeding 12 percent of the worth of its total assets.”

So what’s PBR?

According to the same article, ``The new scheme provides “rewards and penalties for performance and non-performance respectively, Jose de Jesus, Meralco president said.

``Under the said mechanism, Meralco may be required to pay fines should its performance — such as failing to immediately respond to a blackout — fall below certain standards.”

And why PBR?

According to the “quasi independent” regulator of Meralco the Energy Regulatory Commission (ERC),

``The ERC adopted the PBR for distribution utilities starting in 2005 pursuant to its authority under Section 43 (f) of Republic Act No. 9136 (EPIRA) to adopt internationally accepted rate making methodologies. PBR strives to achieve a balance between efficient price levels, allowing utilities efficient revenue to ensure their sustainability, and maintaining or improving network service performance levels. It provides strong incentives to improve operational efficiencies. International experience (Australia and United Kingdom) indicates that, over time, with its built-in mechanisms for incentives and fines depending on the utilities’ performance, PBR leads to reductions in the real price of electricity distribution while improving service levels.”

Aside, the ERC has required Meralco to implement a subsidized rates for the poor by the so-called “NEW LIFELINE program, where ``The ERC reiterated that customers consuming only 20 kWh and below shall continue to enjoy the 100% discount granted them and shall pay only the adjusted PhP5.30 per month metering charge, while the other lifeline customers shall enjoy a discount corresponding to the consumption level under the new lifeline program approved under the DTI case, including the PhP21.00/customer/month minimum charge.”

Implications Of The Business Model: Absolute Dependence On Political Discretion!

What ALL of these means:

1. Basically prices charged to the paying consumers of Meralco are solely determined by the ERC and NOT by the markets.

This means that Meralco’s profits are ultimately determined by fickle political winds.

As Ludwig von Mises described of Bureaucratic Management of Private Enterprises, ``But ours is an age of a general attack on the profit motive. Public opinion condemns it as highly immoral and extremely detrimental to the commonweal. Political parties and governments are anxious to remove it and to put in its place what they call the “service” point of view and what is in fact bureaucratic management.”

Think $100 oil. Rising energy prices are likely to stoke political discomfort among the society’s underprivileged from which would force politicians to focus on “windfall profits”.

Yet, in a world where profits will be deemed as inconsistent with political interests, the owners of Meralco will likely wring profits out through other mechanisms, e.g. off balance sheet transactions, loans or contracts to affiliated parties, transfer pricing and etc.

In short, where financial reports will unlikely be transparent, the interests of the owners of Meralco and the minority shareholders departs.

2. Meralco maintains a subsidy for the poor from which are tacitly charged to the account of the middle and high income consumers.

This exemplifies as a “private” company, functioning under stringent control of political interests, conducting the political redistribution aspect in behalf of the government. Hence Meralco acts as a subcontracted implementing agent under political behest.

This implies that economic rents or “profits” for Meralco’s owner managers will only be attained under the auspices of the political leadership for as long as the political interests are served.

3. Under the PBR, the ERC determines the “carrot and stick” for Meralco.

Basically, Meralco’s lifeline hangs on ERC’s dictate!

This implies that the ERC and Meralco will haggle over what comprises as sufficient or inadequate under the PBR guidelines and NOT the consumers.

And since rules are always technically subjective and subject to nonlinear or amorphous interpretations, they will be subject to compromises. Ask the lawyers.

Therefore this implies two things:

One absolute subservience to the political office, where to quote Ludwig von Mises in Bureaucracy, ``Under this system the government has unlimited power to ruin every enterprise or to lavish favors upon it. The success or failure of every business depends entirely upon the free discretion of those in office.” (bold highlights mine)

Second, instead of looking after the welfare of its clients (Metro Manila consumers), the unlimited dependence on the discretion of the government bureaucracy means conflict of interests from parties involved abound.

Principally, the owner’s priorities will mostly be directed into the realm of public relations; of wheedling or currying favor with that of ‘The Powers That Be’. Satisfying the public will requirements will be subordinate to this.

Again from Ludwig von Mises, ``In such an environment the entrepreneur must resort to two means: diplomacy and bribery. He must use these methods not only with regard to the ruling party, but no less with regard to the outlawed and persecuted opposition groups which one day may seize the reins. It is a dangerous kind of double-dealing; only men devoid of fear and inhibitions can last in this rotten milieu. Businessmen who have grown up under the conditions of a more liberal age have to leave and are replaced by adventurers.” (bold emphasis mine)

The sordid and unfortunate experience of the current managers in the besieged Lopez group (who appear to be outgoing****), having to oppose the PGMA administration politically, serves as fundamental and shining example of the consequences of political defiance.

So those nurturing the view that owner-managers of political enterprises will be looking for one dimensional financial bottom line growth are living in a world of fairy tales.

Thus, financial statements have little relevance to Meralco’s valuation as a financial security because economic rents accruing the owner-managers of Meralco may come in sundry forms, than simplistically “profits” as defined by textbooks.

Besides, as pointed out in Has Meralco’s Takeover Been A Good Sign?, the current managing owners of Meralco have to deal with socio-political, bureaucratic and political risks, which ultimately mean that they need to be in constant harmonious relations with the current and forthcoming political leaders.

These are things that are learned outside of traditional or mainstream school curriculums. And yet these signify as unorthodox or contrarian views that operate realistically.

4. The ERC’s leadership is appointed by the President of the Philippines.

This makes the agency hardly independent as purported to be, but instead beholden to the administration.

Again since political appointments are almost always based on political affiliates or interests and are hardly ever about virtues or meritocracy, the direction of regulatory implementation and compliance will likely be dependent on the caprices of the political leadership.

Conclusion/Additional Comments

All these imply that the rewards from the ownership of Meralco comes with the blessings of the ‘Powers That Be’ combined with a possible implied backstop (guarantee) in the case of failure or bankruptcy, provided that the interests of the company’s owner managers or political entrepreneurs operate along the lines of interests of the incumbent political leaders.

Therefore it would be foolhardy or naïve to believe that the tycoons that got engaged in Meralco with billions of pesos of investments, had been there to only leverage on the political misfortunes of the present owners and to speculate on share prices while at the same time ignoring the risks associated with the political aspects of having a stake in Meralco.

Also, this implies that the changing dynamics of the ownership structure of Meralco strongly alludes to the next president-the identity of which only the kingmakers or the chief Meralco proponents know.

****The prevailing notion is that there has been an ongoing power struggle in Meralco.

For me, this seems like an oversimplistic crock.

In my view, both protagonists appear like unheralded allies, only awaiting the appropriate opportunity for a graceful exit for the Lopezes, which I think should come after the elections.

As per Joe Studwell in Asian Godfathers, ``The reality is that tycoons are typically forced to invest together because of the environment in which they operate.” (emphasis mine)

Considering that Meralco’s destiny is fundamentally intertwined with the Presidency, this probably implies that both godfathers could be straddling in support of different candidates in the forthcoming Presidential elections where its outcome will decide who among the two groups will takeover.

Although it is most likely that a price agreement for the prospective exchange may have already been sealed but perhaps at prices much less than the rumors (my guess is anywhere Php 90-120).

Moreover, it has been my inclination to believe that the Meralco saga will unfold similar to the Philippine Airlines privatization, where former PLDT chair Antonio Cojuangco initially fronted for the bidding which ultimately landed in the laps of Taipan Lucio Tan, the current owner.

Finally, of course, both parties would want to see Meralco’s share prices remain elevated, hence through various associates or intermediaries, they might continue to float stories from which the public so eagerly yearns for, as appetizer for their innate speculative instincts operating under today’s loose monetary environs.

However, the idea is-once the political matters have been settled, excess shares could be sold through the markets or that if any contingency arises (such as a dark horse winner in the Presidential elections) both parties can avail of present lofty prices as an exit strategy.