Philippines seeks fix for world’s worst-performing stock market
The country has only listed a fraction of the companies than its regional peers
[MANILA] It’s the textbook investment strategy – save consistently and let time and compound interest do its work. That’s what Carl Edison Balagtas did in 2016 when he started socking half of his monthly salary into the Philippines stock market in hopes of securing his future.
Ten years on, that strategy did not just fall short, it turned out to be one of the worst investment decisions the Manila-based lawyer could have made. “I was hoping the stock market would be the vehicle to achieve my goal but it did not turn out that way.”
Balagtas’s experience reflects a deeper malaise in the Philippine equities market, which has persistently lagged behind regional and global peers. Over the past decade, the benchmark Philippine Stock Exchange Index (PSEi) has tumbled 17 per cent, making it the worst performer among global benchmarks tracked by Bloomberg. By contrast, a gauge of Asia-Pacific stocks have jumped 70 per cent while neighbouring Indonesia’s Jakarta Composite Index has surged 83 per cent.
The PSEi has slid 9 per cent this year, the weakest showing in Asia, dragged by structural issues such as limited market diversity, sluggish turnover and a dearth of new listings. A major government scandal has further eroded investor confidence. While regulators have pledged reforms to improve liquidity and boost participation, analysts say more aggressive action is needed.
“The risk is the Philippines might become so marginal, people will stop looking at us,” said Eduardo Francisco, president of investment bank BDO Capital & Investment. “Companies are making money, they are meeting their targets, but the demand is not there.”
The stakes could not be higher ahead of the listing of Maynilad Water Services this week, whose initial public offering (IPO) marks the country’s biggest since Monde Nissin’s record-breaking debut in 2021. As the country’s US$226 billion stock market struggles, Maynilad’s performance could serve as a key litmus test of investor appetite. A successful offering would help spur much-needed excitement into an economy grappling with currency pressures and trade restraints.
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Structural challenges
Underlying the persistent weakness is a lack of diversity in the market. The MSCI Philippines Index has only 11 members, with over two-thirds of the gauge concentrated in financials and industrials. That compares to neighbouring markets such as Malaysia, Indonesia and Thailand, which have more balanced compositions and include bigger representation from consumer, technology and health-care sectors.
The challenges run beyond a lack of diversity. The country has only listed a fraction of the companies than its regional peers. Over the past five years, newly listed firms have seen their shares drop by about one-third on a weighted average basis, according to data compiled by Bloomberg, compared to a nearly 50 per cent increase across South-east Asia.
“There are a lot of corporates who are on the lookout to do IPOs, but the timing has to be right, especially for the sizeable ones,” said Pamela Victoriano, senior vice-president of investment banking at Unicapital.
Casino operator Hann Holdings postponed its up to 11.8 billion pesos IPO originally scheduled for September due to market conditions, while fintech giant GCash has delayed its Manila listing to the second half of 2026. Only one firm, fuel trader Top Line Business Development, has braved going public this year.
For Isidro Consunji, chairman of DMCI Holdings and Semirara Mining & Power, the market’s poor response to strong financial performance has been a source of frustration. Despite Semirara’s net income jumping more than 80 per cent over the past decade, shares have slid. DMCI’s profits rose nearly 50 per cent in the same period, but shares have fallen more than 9 per cent.
“Foreign investors don’t pay attention to the Philippine stock market,” Consunji said. “The Philippine economy is weak, we can’t do anything about it.”
Securities and Exchange Commission chair Francis Lim readily accepts that structural and integrity issues are plaguing the stock market. To address this, his agency is pushing for state-owned firms to go public and is rolling out new guidelines aimed at attracting foreign investors.
Those prospects, coupled with continued rate cuts by the central bank and humming economic growth prospects, could spur some upside, analysts say.
The Philippine Stock Exchange is also hoping to educate more retail investors and ease listing requirements and various disclosures to revive interest. “What is the most important ingredient in the stock market? Confidence. But there is none,” according to Bourse chief executive officer Ramon Monzon.
For now, the Philippines is stuck in a rut, offering bargain prices to domestic and foreign investors alike. That’s forcing investors like Balagtas to look elsewhere when thinking about his future. “What I realised is when you see gains, sell it. It’s unlike the US which continues to go up. What can I say, I am so disappointed.” BLOOMBERG
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