SSS eyes trading of gold certificates on local bourse

The Social Security System (SSS) wants to introduce the trading of gold certificates on the stock exchange to give investors a new investment vehicle while allowing it to hedge its assets against price fluctuations. In a statement, the pension fund said it had written the Bangko Sentral ng Pilipinas (BSP) to express its intent to buy P1 billion worth of gold. The central bank has $5.95 billion worth of gold reserves as of March. "Eventually, the SSS intends to issue gold certificates," SSS President Romulo L. Neri said. SSS said it hoped to eventually set up a trading mechanism for these gold certificates on the Philippine Stock Exchange (PSE). SSS spokesman Joel P. Palacios said in a telephone interview the letter was sent to central bank Governor Amando M. Tetangco Jr. last April 16. But the plan to buy gold from the central bank and issue tradable gold certificates still needed to be approved by the Social Security Commission, the fund’s board. "Once the gold is available, we will issue certificates to represent specific units of gold and the certificates will be traded [on] the PSE," Palacios said. "The plan would enable SSS to hedge part of its assets in gold reserves, which is widely considered a safe and stable investment," the SSS said. "Gold is a haven for investors during times of currency devaluations," it said, adding that gold certificates would give investors a hedge against price fluctuations, aside from presenting them with another investment option. Neri said trading of gold certificates would result in additional income for the pension fund and help the central bank mop up excess liquidity in the financial system. Sought for comment, Astro C. del Castillo, managing director of First Grade Holdings, Inc., welcomed the plan, noting that during a crisis, people usually go to gold for safety, resulting in rising prices. "The more instruments that we have [on] the PSE, the better. Hopefully, it will attract more investors," he said. He noted, however, that gold is traded on other Asian exchanges as a commodity and not as a security. The SSS is mandated to invest in central bank-approved investment instruments. As of last December, the SSS had over P260 billion in its investment reserve fund. The SSS investment portfolio includes placements in government securities, equities, member and development loans, housing and real estate. — Louella D. Desiderio, BusinessWorld