MANILA Citigroup Inc. and Merrill Lynch & Co. will join an exodus of foreign investment banks quitting the Philippine stock market, where average daily turnover almost halved this year to just $13 million.
Merrill Lynch will sell its four-year-old Philippine brokerage the nations biggest, accounting for about 7% of trade to local managers, while Citigroups brokerage unit, which employs three, will close at the end of August.
Nomura Securities Co. and at least seven other financial service companies have already left the market, whose key index of 33 stocks is worth $13.1 billion, less than 3% of the value of Hong Kongs benchmark Hang Seng index.
Investors are quitting the Philippines, concerned over a weak economy in which a record 4.5 million people, or 13% of the work force, are unemployed, and political turmoil that in January saw popular protests topple former President Joseph Estradas administration.
Of the four companies that make up 47% of the Philippine Composite Index, Ayala Corp., Metropolitan Bank and Trust Co., Philippine Long Distance Telephone Co., and San Miguel Corp., only the bank has risen in value this year, with the rest falling as much as 25%.
Were closing the equities trading business in Manila, said Mei Zhang, a Hong Kong-based spokeswoman for Salomon Smith Barney Inc., Citigroups investment banking unit. Were moving it offshore to reduce the costs.
Merrill Lynch, which opened an equities business in Manila in 1997, is selling its business to managers, who will rename it Philippine Equity Partners Securities Inc., Merrill said in a statement. The U.S. investment bank will use the company as its exclusive brokerage for trading on the stock exchange, it said.
This enables local management to participate more directly in the future success of the operation, said Anthony Stalker, Merrill Lynchs head of Asia-Pacific region equity markets.
Merrill Lynchs management buyout is not the first in the Philippine brokerage industry. In 1999, employees bought a 60% stake in the local securities unit of Deutsche Bank AG and renamed it Regis Partners Inc. And its not the first time Merrill has sold a unit to its staff: Its U.S. stock fund group, which manages about $3 billion, was sold this summer to a group of the firms money management executives in Los Angeles.
The Philippines Stock Exchange composite index has lost 10% of its value this year.