PSE: From ‘old boys’ club’ to modern, unified exchange
Over the past 40 years, the Philippine Stock Exchange (PSE) has undergone massive and significant transformation.
It has moved, for instance, from all-manual stock trading executed through trading floors to fully electronic systems where transactions can be done via mobile phones.
Also, as Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines Inc., pointed out to the Inquirer, the Philippine Stock Exchange index (PSEi) has evolved “from a smaller set of blue-chip firms to a more diversified representation of sectors such as property, banking, and utilities.”
And all throughout that time, the Philippine Daily Inquirer has been a witness and a chronicler of the crucial events and milestones that shaped PSE.
Indeed, the local market emerged as one of the global standouts in recent decades.
However, the unending affair of massive government corruption has shot down investor confidence for now, bringing valuations to levels even worse than the COVID-19 pandemic lows.
Nevertheless, volatility is a hallmark of the stock market that has been a crucial part of the economy, providing funds for companies wanting to expand.
As more firms in different sectors get financial muscle to scale up, this means more investment flows into the country, a boosted labor market and healthier consumer spending.
All these could lead to faster economic growth—which is why people often refer to the stock market barometer as an advanced indicator of the economy.
For Toby Allan Arce, head of sales trading at Globalinks Securities and Stocks Inc., PSE has witnessed a “profound transformation,” built by institutional reforms, modernization, as well as critical economic shifts.
Beginnings
Known as one of the oldest stock market exchanges in Asia, the local stock market began in 1927 during the American colonial period, thanks to a small group of businessmen who traded securities during their spare time.
The Manila Stock Exchange gained more traction among the investing public, with the focus set on mining and oil exploration sectors.
Two decades later, 14 firms were successfully listed. Then came a second platform, the Makati Stock Exchange, in 1963.
As interest grew, more government intervention was sought, leading to initiatives meant to standardize their trading activities.
But according to a previous report of the Philippine Institute for Development Studies, the local bourse remained “largely insignificant” when compared to other financial sectors.
The private sector steering the wheel and the government’s small pushes were not enough, as the development of the market was weighed down by policies. Also, borrowing funds from banks was cheaper and easier, dropping the need to raise capital through the stock market.
The lack of strong regulatory control also discouraged investors.
In 1987, both exchanges were even trading the same listed stocks—even as they had different policies, members and prices, further creating confusion for investors.
The boom starts
In 1992, the administration of President Fidel Ramos moved to finally unify the two stock exchanges to beef up the capital market, giving birth to the PSE we all know now.
People remember it as a “shotgun wedding” orchestrated by the late president, to whom market players are now grateful for. Today, one can’t imagine having two separate exchanges cannibalizing each other in a small pond.
The unification scrapped diverse policies and prices, providing a level playing field for investors.
UnionBank’s Asuncion said the index was fired up even more with the capital market liberalization in the 1990s, making way for foreign investors.
From 1992 to 1994, recorded foreign portfolio investment surged by nearly 300 percent.
But while the capital market was on the rise, the Asian Financial Crisis erupted in 1997, causing PSEi to plunge.
Not only that, political turmoil, triggered by protests against then President Joseph Estrada, alongside the 9-11 terrorist attacks against the United States, prevented the local bourse from returning to a stronger ground.
Eventually, the Estrada administration was overthrown during the People Power 2 Revolution in 2001.
Regaining footing
The economist said adjustments in capital gains and transaction taxes, coupled with stricter disclosure policies, propped up investor confidence.
Both Asuncion and Arce also cited the demutualization of PSE, as one of the key phases that had shaped the market.
The conversion of PSE into a stock corporation that eventually listed on its own bourse was among the reforms required by the Securities Regulation Code. This law was passed to strengthen regulation in the aftermath of the BW stock price manipulation scandal of 1999.
Arce even said that the PSE demutualization was “one of the most transformative milestones, converting the exchange into a shareholder-owned corporation, boosting transparency, and aligning its governance with global standards.”
Apart from shedding the “Old Boys Club” image, such reforms also helped PSE to raise funds to modernize its system—from floor-based dealing to electronic trading.
“The last 15 to 20 years have been characterized by digital acceleration and regulatory strengthening. The transition to the PSE trade trading engine, partnerships with global technology providers, and the widespread adoption of online brokerage platforms ushered in the era of retail investor democratization,” Arce told the Inquirer.
Note that since unification, PSE continued to operate two separate trading floors that used to be occupied by the Manila and Makati bourses. It was only in 2018 that PSE finally unified its trading floors at its new headquarters in the capital region’s premier urban hub Bonifacio Global City.
The kings and queens during and after pandemic
Aside from accelerating digitalization, the main-share PSEi—previously crowded with traditional industrial and manufacturing-focused groups—has seen the expansion of “sectors that reflected the Philippines’ emergence as a consumption- and services-driven economy,” according to Arce.
“Having been in the industry for only about half of this 40-year span, I’ve observed a noticeable shift in the PSEi’s composition, one that mirrors broader changes in the Philippine economy,” he said.
He noted the presence of major property players, like Ayala Land, SM Prime Holdings, Megaworld and Robinsons Land.
This, he said, “signaled that urbanization and property development had become central economic engines.”
Asuncion, meanwhile, said that participation from the retail sector had “surged” during the COVID-19 lockdowns.
REIT debut
In 2009, Philippine Congress passed the Real Estate Investment Trust (REIT) Act, aiming to introduce this new asset class to the market. This is to give investors more options, while allowing property developers to recycle capital by selling down their interest in specific operating assets.
REITs are corporations that invest in income-generating real estate assets, like malls, office buildings and renewable energy power plants.
However, the REIT market did not take off until 2020, or 11 years after the passing of the enabling law, due to stringent provisions in the implementing rules and regulations. During the term of Finance Secretary Carlos Dominguez III, an acceptable REIT framework finally came to light.
Ayala Land was the first to test the market, braving the pandemic with the initial public offering of AREIT Inc.
As the asset class logs more interests, the Securities and Exchange Commission has proposed updated rules to further bolster the sector, including easing the minimum public ownership requirements and expanding the scope of income-generating properties under the REIT Act of 2009.
Soon, REIT investors may add other assets to their portfolio, which may include toll roads, railways, airports and air navigation facilities, alongside ports, information and communications technology infrastructure, energy infrastructure and data centers, among others.
PDS-PSE merger
Decades after the unification of the two stock exchanges, another capital market infrastructure consolidation is unfolding.
PSE has moved to take over Philippine Dealing System Holdings Corp. (PDS), allowing it to corner 92.06 percent.
PDS owns fixed-income exchange operator Philippine Dealing and Exchange Corp. (PDEx) as well as the Philippine Depository and Trust Corp. (PDTC).
PSE has long aspired to develop a real working exchange for corporate bonds within PDEx. The depository business under PDTC is also a big incentive for PSE, as this accounts for the bulk of the PDS’ net income.
Even without PDS, the bourse had been wanting to set up its own depository system
What now?
For the past months, however, PSEi recorded significant losses as investor sentiment weakened. As rampant corruption in the government’s infrastructure projects has been exposed, by no less than President Marcos, this prompted a series of probes.
State spending was also tightened, resulting in an anemic economic growth in the third quarter.
No less than PSE president Ramon Monzon, together with the PSE staff, joined the mass protests against corruption in Edsa.
“In the near term, sentiment remains cautious given corruption scandals and sluggish economic growth. These factors may keep valuations subdued, with the index likely consolidating within the 5,600–6,000 range,” Asuncion said.
But improvements in policy responses, including anticorruption measures, may help PSEi bounce back, he said.
“Expected BSP (Bangko Sentral ng Pilipinas) rate cuts in 2026 may also provide support through lower funding costs. Key catalysts to watch include infrastructure spending revival, corporate earnings resilience, and clarity on political stability,” he added.
Nearing 3M mark
The number of stock market accounts in the PSE reached 2.86 million in 2024, up by 50.1 percent from 1.91 million in 2023. This was fueled by a 62-percent surge in online accounts to 2.47 million.
About 99 percent of total accounts are held by Filipinos.
Indeed, the exchange has gone a long way. For decades, penetration rate was well below 1 percent of the population. However, there’s still much room to grow as the current numbers indicate that only 2.5 percent of Filipinos participate in the stock market.
“More than the numbers, what is important is that retail investors are equipped with investment know-how to avoid investing pitfalls. We address this need for investor education through our various investing literacy initiatives. We also actively work with trading participants and government and private entities to spread the word about personal finance and stock market investing,” Monzon said.
Aside from the PSE Academy website and the activities of its Market Education team, Monzon cited the technology platforms intended for retail investors.
“At the PSE, we have digital channels to support retail investors such as PSE EASy and PSE EQUIP. We recently launched the latest version of the PSE EASy mobile app that allows local small investors to subscribe to and pay for initial public offerings and follow-on offerings directly on the app. For PSE EQUIP, we now have a premium subscription model that provides access to real-time market data.”
The average value of online trades went up by 7.9 percent to about P51,000. Non-online trades also rose by 4.5 percent to an average of about P100,000 per transaction.
“While growth in retail accounts has been remarkable, the real challenge is getting retail investors to participate more actively in our market as they only contribute 16 percent to total value turnover.
The 30 to 44 age range had the largest share in total and online accounts and recorded a slight uptick in their share from the previous year’s data. They cornered 48.8 percent of total accounts.
The second biggest age group, the 18 to 29 year olds, also registered growth in its number of retail investors. They had 26.5 percent of total accounts.
As such, the country’s young, tech-savvy population offers much hope in widening the pool of stock market investors.
