PHILIPPINES EQUITIES UNDER PRESSURE

While the market has fallen, value opportunities emerge for long‑term investors

The Philippine equity market has pulled back sharply in recent weeks, weighed down by a weaker peso and renewed inflation concerns, but the underlying story is increasingly one of valuation rather than structural deterioration.

For overseas institutional investors, the combination of lower prices, compressed multiples, and still‑solid corporate fundamentals is beginning to create a more interesting entry point into a market that had previously been viewed as fully valued.

The Philippine Stock Exchange index (PSEi) managed a modest rebound on Wednesday after a five‑day slide, rising 0.70 percent to close at 5,907.89, while the broader All Shares index posted the same percentage gain to 3,343.60. That move was largely attributed to bargain hunting rather than a shift in macro sentiment, underscoring how far prices have fallen in a short period and how selectively investors are now engaging with the market.

Beneath the headline, performance was mixed across sectors, reflecting ongoing rotation rather than a broad‑based risk‑on move. Services led the advance with a 1.33 percent gain, followed by Industrials at 1.29 percent and Financials at 0.32 percent, suggesting continued interest in businesses tied to domestic demand, infrastructure, and the banking system. Property, Mining and Oil, and Holding Firms registered small declines of 0.08 percent, 0.06 percent, and 0.03 percent, respectively, indicating that not all segments have yet found a clear floor.

Market breadth, however, hinted at emerging resilience. Trading volume reached 1.34 billion shares worth PHP7.72 billion, with advancers outnumbering decliners 105 to 78, and 54 issues closing unchanged.

This pattern is consistent with a market where investors are starting to differentiate between names based on balance sheet strength, earnings visibility, and dividend support, rather than selling indiscriminately across the board.

Local market commentary framed the day’s move as an early sign of value‑driven interest. Rizal Commercial Banking Corporation chief economist Michael Ricafort noted that the PSEi’s uptick was driven primarily by bargain hunting after recent declines, suggesting that domestic participants are already positioning around depressed prices. At the same time, he highlighted that investors remain cautious ahead of the US Federal Reserve’s policy decision, with much of the near‑term risk still tied to the global rate environment and its impact on risk appetite and currencies.

On the FX side, the peso’s weakness remains a key source of concern – but it is also a factor that can enhance returns for unhedged foreign investors if and when the currency stabilises or recovers. The peso slipped further to close at 61.56 to the US dollar from 61.30 previously, after opening weaker at 61.20 compared with 60.80 the day before. It traded in a range of 61.20 to 61.67 and averaged 61.50 during the session, while dollar turnover eased to USD1.61 billion from USD1.75 billion.

For overseas institutions, this mix of lower equity prices and a softer currency needs to be seen in the context of fundamentals.

The Philippines continues to post solid medium‑term growth prospects, with a consumption‑driven economy, favourable demographics, and ongoing investment in infrastructure and energy transition. Corporate balance sheets in key sectors such as banking, infrastructure, utilities, and select consumer names remain generally sound, and many listed companies have demonstrated their ability to navigate past cycles of currency volatility and inflation shocks.

Inflation risk has undoubtedly increased, largely driven by higher energy and food prices and a weaker peso, and this has forced the central bank back into a more hawkish stance. But from a portfolio‑construction perspective, these macro headwinds are now more visibly reflected in equity valuations.

Price‑to‑earnings multiples, dividend yields, and price‑to‑book ratios across several blue‑chip and mid‑cap counters are at levels that long‑term investors may find difficult to ignore, particularly when compared with regional peers.

In this environment, the Philippine market is shifting from a momentum trade to a stock‑picker’s market. The headline indices may continue to face pressure as global rates remain elevated and the currency adjusts, but that very pressure is creating room for disciplined allocators to build or add to positions in high‑quality franchises at more attractive entry points.

For institutions with a multi‑year horizon and the ability to tolerate near‑term volatility, the current phase of weakness in both the peso and the equity market may ultimately be remembered less as a period of stress and more as a window of opportunity.