Is the Philippine Stock Exchange Still Worth Investing In? Expert Analysis for 2025

(Photograph : Unsplash )

A Personal Experience

The first person I encountered in Manila in 2019 during my research on emerging markets while preparing my research was a small investor in a coffee shop in Makati. He informed me that he was proud to say that he bought Philippine stocks every month to amass wealth to his children.

His optimism had died when we talked again several years later. The market he was betting on had barely expanded. I still remember his story not only as his personal experience, but as the reflection of the bigger problems of Philippine Stock Exchange (PSE) today.

What is Going on and Why It Should Be.

According to recent statistics provided by Bloomberg, Philippine Stock Exchange Index (PSEi) has dropped nearly by 20 percent over a decade thus ranking it as one of the poorest major markets in the globe.

Comparatively the Asia-Pacific region in general has increased by approximately 70 percent within the same time. It is not merely a short-term volatility, it is an indication of fewer, more profound, structural problems that have the market still behind.

The following are some of the key causes of the underperformance:

Limited Market Diversity

The PSE is almost controlled by banks and industrial companies, and very minimal representation is offered by new developing industries like technology, health care or consumer goods. Examples include the MSCI Philippines Index, which has 11 companies only - a measly base in comparison with others in the region.

Low Market Activity

Not a lot of companies are taken to the market, and even those who have gone there find it difficult to keep the momentum. The levels of trading are minimal and foreign investors have considerably switched to other destinations.

Lack of Investor Confidence

This problem is acknowledged by even the regulators. PSE CEO Ramon Monzon has quoted that confidence, both on the part of the local and foreign players is the most lacking factor in the market today.

Reforms Are Occurring--But Sluggishly.

SEC has been striving to bring in more listing, ease up the requirements and persuade government-owned companies to enter the market. These are good initiatives, though they have been slow to come and the effects have not been felt much.

In summary: Philippine stocks are cheap, however, low prices are not the only thing that make a market attractive. Permanently, cheap can remain that way without actual structural change.

My Expert Take

I have been conducting some research in the past years on emerging markets (Southeast Asia, Latin America, etc.) and made the observation that there are three typical characteristics of a bad performing market:

Issues that are associated with the organizational structure are difficult to rectify.
Human beings do not win trust on the basis of words but the outcomes.
Low valuations cannot help without the apparent growth engines.

These lessons when applied to the Philippines:

The reforms are underway yet the fruits will be realised over time.
Trust of investors has been weak particularly in relation to foreign funds.
The valuation is good though the liquidity and momentum remain wanting.

My immediate outlook: Assuming that reforms result in an increase in IPO activity and the trading volumes will be improved, we will have a potential of 10-20% recovery in the next 12-24 months. To get a sustainable turnaround, however, the market requires structural depth, more corporate transparency and consistent investor involvement.

The Investment Implication of this.

In the context of planning to invest in the Philippine market by the year 2025, a practical strategy would be:

Recognize the risk. The market is good, but volatile and illiquid.
Focus on quality. Target firms that have regional businesses, have good earnings and good governance.
Track reform progress. Look at evidence of an increase in trading, IPO success, and inflows of foreigners.
Limit exposure. Milk the Philippines like a small, tactic location - not a holding company.
Diversify. Balance risk through investment in other emerging markets which have more stable growth.

Actionable Steps

In the PSE, you can be in the process of following or investing in it, in this case, there are three distinct steps:
Review your portfolio. Performance, governance and check earnings. Cut unproductive or sluggish jobs.
Monitor key signals. Monitor IPO activities, foreign turnover and daily turnover.
Adjust your strategy. In case of stalling of reforms, diminish exposure. Should the momentum become better, then selectively add.

Final Thoughts

Philippine Stock Exchange is not yet a hopeless case, but it will take period, regular reforms and new faith of investors to make it become one. It is a market that is undervalued and understimulated at the moment.

Prudent investors need to be patient and selective. It will only be after structural changes are put into effect and confidence is restored that the real growth story will commence.

Disclaimer:

The article is simply informative and should not be considered as a financial advice. He/she should always seek the advice of a licensed financial advisor prior to investing.

Is the Philippine Stock Exchange Still Worth Investing In? Expert Analysis for 2025