CONGRATULATIONS to central bank Governor Eli Remolona Jr., who was one of 12 awarded by Global Finance as the World’s Best Central Bankers. They were rated as A+ and A at an awards ceremony in Washington, D.C., on Oct. 18. There are over 150 central banks and close to 100 bankers were evaluated. The 12 were from the Czech Republic, Denmark, Dominican Republic, Egypt, Jamaica, Kenya, Mongolia, Paraguay, the Philippines, Serbia, Sri Lanka and Taiwan.

An officer of PCCI recommended Maharlika to use some of its funds investing in second- and third-tier stocks to boost liquidity and so on. I was asked the same at the Finex general meeting last week. I strongly disagree. The views expressed here on Maharlika investing in the stock market are also that of our CEO Rafael Joel Consing, though the characterization and explanation made here are solely mine.

The Philippine Stock Exchange is at a very low point on trading volume, market capitalization and the valuation of its stocks both for the index and even leading stocks, but worst of all are the valuation and liquidity of the smaller cap stocks. By global standards, a market capitalization below $2 billion is small cap and below $1 billion is micro-cap. This is very relevant to the Philippines because another long-standing problem is the majority of the trading volume is from international investors (even though their amount of buying is below that for other comparable Asia markets). In other Asian stock markets, the majority of volume is from domestic buyers. I have read there are less than 3 million individual investors in the Philippines versus 11 million in Vietnam. In other countries, local investors provide most of the trading in smaller cap stocks, hence there are better valuations and trading volume for them in other markets.

In Singapore, before their wealth funds helped address the poor trading volumes, low market capitalization and valuation, the economic managers consulted with major players, including the underwriters, issuers, venture capital firms, private equity firms and institutional investors. Then they announced measures not just buying shares. Analysis preceded action.

At Maharlika, we have over $2 billion in investible funds. That may sound big but is puny compared to that of our neighbors. If we invested all of it into SM Investments or Ayala Corp., it would get us a board seat. If Maharlika bought second- and third-line stocks as suggested, all we would do is transfer their illiquidity at low prices from those who are stuck and want to get out, to Maharlika. Hence, the need to study and make fundamental and comprehensive changes to listing, trading and volume requirements.

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One thing that cannot be addressed by our capital markets players is our imbalanced economy. Outside of food processing, we don’t have much manufacturing and industry. Really just banks, utilities, retail and real estate. Even our business process outsourcing sector is mostly foreign-owned. Tech and manufacturing are what drive growth not just in the economy but in other countries’ stock exchanges as well. It would be great to have a leading tech sector like Taiwan and South Korea, but we don’t. What will drive growth in the stock market? Not the sectors where we are strong as they are limited, mature and already filled with choice and leaders.

Maharlika’s management does not believe purchases in listed stocks serve its mission of national development with profit. Any investment in listed stocks will be limited to those related to the investments we will make for investment reasons and not some broad market action. The people suggesting we invest are correct that Maharlika can do that as the law that created it gives it very broad powers. This administration and Maharlika’s management and board agree that our paramount purpose is spurring national development and fostering the resulting multiplier effect from the additional investments and employment that would generate.

For example, the fund is looking at improving the transmission grid in certain islands that have great tourism and agricultural processing potential but are held back by poor transmission lines that often lead to weekly power outages. If that was addressed, it would not only be good and profitable, but there could be major add-on investments by others in tourism and food processing, and in some cases mining and other industries from stable and affordable power.

The lasting economic development and growth of quality jobs from that is one of Maharlika’s sweet spots and priorities, and something harder for other state-sourced funds that are not as well-equipped to do. Investing in a broad range of lower market cap stocks will not have that multiplier effect.

On Tiglao’s latest riposte, I see no need to respond to his ad hominem attacks on me but should correct points about Joseph Scalise, who I have never met personally but has been unjustifiably maligned. First, what Tiglao writes in his off points reply is not what he misrepresented about Scalise’s dissertation, which was often referenced and misleadingly on his Facebook page (FB) and columns at the time. I found the points Tiglao ascribed to his work incredulous from a doctoral dissertation from a leading program in Asian history. That is why I reached out to Scalise via FB messenger to check and get his response which I wrote about last week. Tiglao calls him a Trotskyite without any justification or relevance.

I read Scalise’s book. I don’t agree with many of his conclusions but respect his research. Then Tiglao wrote that Scalise is not a historian. He has a PhD in history from UC Berkeley and is an assistant professor at HK Baptist University, which Tiglao acknowledges. Scalise’s book was published by Cornell University Press, as will the second, versus Tiglao’s self-published books. My daughter explained how extensive that vetting is. That makes Tiglao’s assertion not just illogical but cognitive dissonance. On Scalise and I supposedly being on opposite sides of the economic ideology spectrum, so what?

I am not an algorithm that only engages with those I agree with. I learn from people with intellectual depth and integrity, even if I disagree with them. I benefit from testing my views and modify, and change them if I learn something different or better, and try to be intellectually humble and open-minded. Occasionally, I succeed. I feel sorry for Bobi, he was a skilled journalist I used to admire but has been overwhelmed by bitterness and closed-mindedness. A view others who know him share.

Disclosure: The author is an independent director of the state-run Maharlika Investment Corp.