Sep. 2--The Bangko Sentral ng Pilipinas (BSP) is prodding the Social Security System (SSS) to diversify its investments in the local capital market to boost its income.

During the pension fund's 52nd anniversary, BSP Governor Amando Tetangco Jr. told SSS members that they should widen their investment opportunities as the domestic capital market is starting to recover.

The fund invests mainly in government securities at about 30 percent of its total investment portfolio, with the rest of its money placed in equities, corporate bonds and properties. It also earns interest from housing and salary loans.

Early this year, Romulo Neri's, SSS president, announced plans to channel the agency's funds to finance the Arroyo administration's Economic Resiliency Plan. Lawmakers opposed it, claiming such a move would violate the pension fund's charter and lacked the imprimatur of members.

Tetangco said the central bank has implemented "initiatives to help develop and deepen the domestic capital market [and] help provide SSS with wider opportunities for investment diversification."

He said the BSP's series of policy rate reductions allowed SSS to lower interest rates for its business and social loan programs. The BSP has reduced its key rates by 200 basis points since December last year, bringing the overnight borrowing and lending rates to 4 percent and 6 percent, respectively.

SSS earlier said its income from investments and other sources at end-June amounted to P11.8 billion, with the value of its blue-chip investments appreciating by P8.61 billion due to the run up in the stock market.

The reserve fund also grew by 8 percent to P242.53 billion year-on-year.

Its collection from contributions reached P36.30 billion, P650 million higher than the P35.65 billion posted in June last year.

During the same period, SSS' assets rose by 9 percent to P254.06 billion from the end-December level.

Tetangco said the investor confidence has been enhanced by Moody's Investors Service's upgrade of the country's sovereign rating outlook from "stable" to "positive." The financial markets have also stabilized as credit spreads have narrowed from the levels seen during the height of the financial turmoil.

In addition, the peso continues to be broadly stable while foreign buying has started to boost the local stock market, the BSP chief said.

"But the caution is still there," Edgar Solilapsi, SSS senior vice president, told reporters.

He said the pension fund could invest more in equities as the economic conditions have improved.

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