Philippine stock market struggles, investors look elsewhere

Carl Edison Balagtas, a Manila-based lawyer, invested half of his monthly salary in the Philippine stock market in 2016, hoping to secure his financial future. A decade later, his strategy has backfired.

“I was hoping the stock market would be the vehicle to achieve my goal, but it did not turn out that way,” Balagtas told South China Morning Post.

His experience reflects a broader issue within the Philippine equities market, which has consistently underperformed compared to regional and global peers.

Over the past ten years, the benchmark Philippine Stock Exchange Index (PSEi) has dropped by 20%, making it the worst-performing major stock index worldwide, according to Bloomberg. In stark contrast, Asia-Pacific stocks have risen by 72%, and neighboring Indonesia’s Jakarta Composite Index has surged by 82%.

The Philippine stock market's struggles have been compounded by sluggish turnover, limited market diversity, and a shortage of new listings. In addition, a major government scandal has further dented investor confidence. On November 3, the PSEi tumbled by 2.8%, extending its year-to-date decline to over 11%, the worst performance in Asia so far in 2023.

“The risk is the Philippines might become so marginal, people will stop looking at us,” said Eduardo Francisco, president of BDO Capital & Investment. “Companies are making money, they are meeting their targets, but the demand is not there.”

Analysts point to structural challenges as key factors holding the market back. The MSCI Philippines Index, for example, has just 11 members, with more than two-thirds of the index concentrated in the financial and industrial sectors. By comparison, regional markets like Malaysia, Indonesia, and Thailand offer a more diversified mix, with larger representation from consumer, technology, and healthcare stocks.

The Philippines has also seen far fewer IPOs than its neighbors. In the past five years, newly listed companies in the Philippines have seen their shares drop by about one-third on average, compared to nearly a 50% rise in Southeast Asia overall.

Pamela Victoriano, senior vice-president at Unicapital, noted that while many companies are considering IPOs, “the timing has to be right, especially for the sizeable ones.” Several major IPOs, such as that of casino operator Hann Holdings, have been delayed due to market conditions, and fintech giant GCash has postponed its listing until 2026.

Isidro Consunji, chairman of DMCI Holdings and Semirara Mining & Power Corporation, expressed frustration over the market’s poor response to solid financial performance. Despite a more than 80% jump in Semirara’s net income over the past decade, its shares have fallen. “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.”

The Philippine Securities and Exchange Commission (SEC) acknowledges the market’s structural problems and is pushing for reforms. SEC Chair Francis Lim emphasised the need for state-owned firms to go public and outlined plans to attract foreign investors. Meanwhile, the Philippine Stock Exchange is working to educate retail investors and relax listing requirements to spark interest.

“What is the most important ingredient in the stock market? Confidence. But there is none,” said Ramon Monzon, CEO of the Philippine Stock Exchange.

As the Philippine stock market remains mired in underperformance, investors like Balagtas are reconsidering their options.

“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,” he said. For now, many investors are looking beyond the Philippines in search of more reliable returns.

By Sabina Mammadli