Investing in FMETF: First Metro Philippine Equity ETF

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Don’t you know that there’s a stock that holds stocks of other companies? It is called the exchange traded fund, and in the Philippines we have the First Metro Philippine Equity Exchange Traded Fund. It is known by its stock ticker, FEMTF.

This article discusses an actual ETF that you can start invest to earn passive income. If this is your first time learning about it, please consider reading up the guide on ETF investing and then you can come back to this page later.

What is FMETF?

FMETF stands for First Metro Philippine Equity Exchange Traded Fund. It is the only exchange traded fund in the market today. Established on January 15, 2013, it was launched by the First Metro Investment Corporation (FMIC), a wholly-owned subsidiary of the Metrobank Group. The First Metro Asset Management, Inc., a company which also sells mutual funds, is its fund manager and principal distributor.

Like mutual funds or UITFs, it holds a basket of shares of companies. However, it is different because you can only invest in it by buying its stocks on the Philippine Stock Exchange. In short, it a fund that is traded on the stock market.

Investment goal of FMETF

Its goal is to simply match the return of the stock index. The stock index is composed of the top 30 companies that are being traded on the Philippine Stock Exchange, which are collectively called the Philippine Stock Exchange index (PSEi).

FMETF achieves this by buying only these companies. Not only that, it also tries to match the proportion of each company to the index as closely as possible.

See the table below for comparison between the composition of the fund and PSEi.

Security NamePSEi %FMETF %
SM INVESTMENTS CORPORATION13.1413.04
AYALA LAND, INC.9.949.8
SM PRIME HOLDINGS, INC.98.97
BDO UNIBANK, INC.7.097.1
AYALA CORPORATION6.656.81
JG SUMMIT HOLDINGS, INC.5.185.16
BANK OF THE PHILIPPINE ISLANDS4.34.31
UNIVERSAL ROBINA CORPORATION4.294.22
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.3.73.67
ABOITIZ EQUITY VENTURES, INC.3.673.68
METROPOLITAN BANK & TRUST COMPANY3.533.51
JOLLIBEE FOODS CORPORATION3.433.52
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY “Common”2.752.99
MANILA ELECTRIC COMPANY2.292.23
GT CAPITAL HOLDINGS, INC.2.031.9
SECURITY BANK CORPORATION1.951.87
MEGAWORLD CORPORATION1.671.65
GLOBE TELECOM, INC.1.611.81
METRO PACIFIC INVESTMENTS CORPORATION1.611.6
SAN MIGUEL CORPORATION1.581.6
ROBINSONS LAND CORPORATION1.371.33
ABOITIZ POWER CORP.1.31.22
ALLIANCE GLOBAL GROUP, INC.1.171.15
BLOOMBERRY RESORTS CORPORATION1.121.14
LT Group, Inc.1.111.17
PUREGOLD PRICE CLUB, INC.1.11.14
ROBINSONS RETAIL HOLDINGS INC.1.061.04
DMCI HOLDINGS, INC.0.940.92
FIRST GEN CORPORATION0.790.9
SEMIRARA MINING AND POWER CORPORATION0.640.57

The composition of the fund is adjusted periodically. This is because PSE also reviews the companies that make up the index, and may either stick to the current list or update it. The review is done every six months.

Features of FMETF

Now that you have a basic understanding of how the fund works, it’s time to discuss some of the finer details. The following are some of its common features.

  • NAVPS
  • market price
  • arbitrage

NAVPS

The net asset value per share is the the fund’s assets minus liabilities, and then divided by the number of outstanding shares. It indicates how much value each share holds. With FMETF, this is computed every minute during trading hours.

Market price

The market price is what investors are willing to buy or sell for each FMETF. It varies as frequently as there is a trade that is occurring at any given moment. In a perfect world, the market price must be equal to the NAVPS.

Arbitrage

However at times, what people are willing to pay to buy its stock may not be the same as the NAVPS. This is where arbitrage occurs. It tries to bring the market price as close as possible to NAVPS by either selling shares when price is high or buying them when the price is down.

How to buy FMETF stock

In investing, you would need the following.

  • Broker’s account
  • Minimum investment
  • Trading

Broker’s account

A broker is the company that executes your trade. Through them, you can buy and sell stocks. Example companies are Unicapital Securities Inc., First Metro Securities Inc., Col Financial, etc.

Minimum investment

How much is the initial capital? Actually, it is set by the Philippine Stock Exchange. Your minimum investment depends on the minimum board lot, which factors in the price of the stock. In the table below, it shows that you need to buy at least 10 shares per transaction since current market price is ₱120.

PSE minimum board lot

Fees

Once you have an account set up, you can already start trading. You should be able to see the FMETF ticker.

Whenever you trade, there will be fees: broker’s commission, value added tax, PSE fee, Securities Clearing Corporation of the Philippines fee, and seller’s tax.

Advantages of investing in FMETF

Why invest in FMETF? These are the benefits when you start buying its stock.

Less costly

Buying its stock to participate in the earning potential of “blue chip” companies is less costly than purchasing individual shares. The table below shows the actual price of one share of each “blue chip” company and how much you’ll need if you buy the minimum number of shares (called board lot) of all of them. At this rate, you’d need to have at least ₱128,266.50.

Compare that to one exchange traded fund stock that costs ₱120 more or less, and that already contains all of these companies. (All the prices are updated as of July 11, 2019).

Security NameLast Trade PriceBoard lotTotal
ABOITIZ EQUITY VENTURES, INC.910.00109,100.00
ABOITIZ POWER CORP.56.0010560.00
ALLIANCE GLOBAL GROUP, INC.15.401001,540.00
AYALA CORPORATION51.25 10512.50
AYALA LAND, INC.36.7010367.00
BANK OF THE PHILIPPINE ISLANDS142.30101,423.00
BDO UNIBANK, INC.11.42 1001,142.00
BLOOMBERRY RESORTS CORPORATION78.5010785.00
DMCI HOLDINGS, INC.10.02 1001,002.00
FIRST GEN CORPORATION27.001002,700.00
GLOBE TELECOM, INC.2,174.00510,870.00
GT CAPITAL HOLDINGS, INC.845.00108,450.00
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.142.5010014,250.00
JG SUMMIT HOLDINGS, INC.282.0010028,200.00
JOLLIBEE FOODS CORPORATION69.7010 697.00
LT Group, Inc.15.581001,558.00
MANILA ELECTRIC COMPANY71.5010715.00
MEGAWORLD CORPORATION6.01 100601.00
METRO PACIFIC INVESTMENTS CORPORATION383.00103,830.00
METROPOLITAN BANK & TRUST COMPANY4.8010004,800.00
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY “Common”45.501004,550.00
PUREGOLD PRICE CLUB, INC.26.65 1002,665.00
ROBINSONS LAND CORPORATION78.0010780.00
ROBINSONS RETAIL HOLDINGS INC.23.001002,300.00
SAN MIGUEL CORPORATION173.00101,730.00
SECURITY BANK CORPORATION980.00109,800.00
SEMIRARA MINING AND POWER CORPORATION174.90101,749.00
SM INVESTMENTS CORPORATION38.501003,850.00
SM PRIME HOLDINGS, INC.1,198.0055,990.00
UNIVERSAL ROBINA CORPORATION175.00101,750.00
Total128,266.50

Matches returns of the index

It holds a basket of shares from the top 30 companies whose businesses are judged to be representative of the stock market. In the process, its returns is close to how the index performs.

5-year chart of FMETF and PSEi returns. (Bloomberg)

Less fees

The fund is passively managed. What this means is that the fund manager’s job is relatively easy. There is not much research that goes into determining how many and what shares to buy.

This translates to lower management fee, which is 0.50% of the total net asset value according to disclosures. That’s lower than most, if not all, mutual funds and UITFs that are available in the Philippine market.

Diversified

By holding one FMETF stock, you’re exposed to a diversified portfolio of businesses across different industries. It dampens the impact when one company or an industry experiences a slowdown.

Transparent

Its stock is priced continuously unlike mutual funds and UITFs whose prices are determined at the end of the trading day. Also, its underlying assets are disclosed on the website. You can see them all on First Metro’s website.

Cons

And here are a few of the disadvantages.

  • You need to partner with a stock broker to buy the stock.
  • Its market price may be more than its value, so you’re buying an overvalued stock. Check the net asset value per share when you’re about to trade.
  • You have no control on the list of companies that make up its underlying assets.
  • If you want to get your money back, you need to wait for someone to buy your shares.

What is the historical performance of FMETF?

1 year3 years5 yearsAccumulative
FMETF12.63%4.62%4.44%124.28%
PSEi9.90%0.59%3.41%118.27%

The table shows the compounded annual growth rate for 1 year, 3 years, and 5 years. For comparison, there’s a row for FMETF and the Philippine Stock Exchange index.

The last column shows how much your money would’ve grown five years ago, which is roughly more than double your original investment. So if you invested ₱10,000 five years ago, your money would now be worth ₱22,286 with fees excluded.

Again, it’s worth remembering that past performance does not guarantee future returns.

References