Opportunities in PH stock market
The Philippine market enters 2026 facing a challenging macro backdrop, driven by both global and domestic headwinds.
Globally, economic growth is expected to slow as the full-year impact of newly implemented trade barriers (such as the Trump tariffs) and ongoing policy uncertainty weigh on export demand and private sector investment.
Domestically, government spending growth is likely to moderate, as stricter measures to address corruption have resulted in slower infrastructure disbursements.
Meanwhile, consumer spending could remain subdued, with the labor market showing early signs of softening and consumer confidence weakening.
There’s also a greater risk of a sharp correction in the US equity market given signs of slowdown in the US economy, increasing stress in private credit, and growing concerns that the future earnings of artificial intelligence-related companies may not be sufficient to justify elevated valuations and massive capital expenditure requirements.
Historically, Philippine stocks have underperformed during US market downturns, and this pattern could reemerge should the US experience a steep decline.
That said, there are also clear reasons to remain constructive. Inflation and interest rates remain relatively low, providing important macro support, while much of the bad news appears already reflected in valuations.
The Philippine Stock Exchange Index is now trading near Global Financial Crisis-level multiples, with many stocks priced below their levels from a decade ago despite significantly higher earnings today.
Elevated dividend yields help reduce the risk of value traps. Right now, there are many stocks providing dividend yields that are higher than bond rates.
A bonus is the potential for stocks to pay higher cash dividends and to trade at much higher prices in the future as most continue to grow their profits and are trading at very cheap valuations.
A potential rotation into emerging markets where the Philippine stock market belongs could also provide support.
Last year, the MSCI Emerging Market index jumped by around 31 percent, outperforming the USs S&P 500, which increased by around 17 percent.
Cheaper valuations, a weaker US dollar, rising commodity prices, and the strong performance of select EM technology plays were responsible for the outperformance of many emerging markets last year as investors looked for value beyond developed markets.
If the shift continues, Philippine equities could benefit given their deeply discounted valuations.
Several sectors could rebound this year as corporate earnings improve. Banking stocks, which underperformed last year, are well-positioned for a recovery.
Net interest margins—previously expected to compress due to falling interest rates—defied expectations and continued to expand in the first nine months of 2025.
This was driven by faster declines in deposit rates and banks’ increasing exposure to higher-margin consumer loans.
At the same time, the rise in loan loss provisions is expected to moderate this year, as provisioning levels have normalized and asset quality remains generally healthy.
Property stocks also appear to have bottomed, with profits likely at or near their trough.
Office and mall leasing businesses are already performing well, while residential demand is showing early signs of recovery after hitting a low in the first quarter of 2025.
Sales volumes are improving, supported by more affordable payment terms resulting from lower interest rates and developer incentives such as extended payment schemes and lease-to-own offers for ready-for-occupancy units.
Consumer companies may likewise see earnings improve, providing room for share price recovery.
Prices of key commodities such as wheat, palm oil, and coconut oil have begun to ease, which should support margin expansion and reduce working capital requirements, leading to lower financing costs.
In addition, improving weather conditions in the second half of 2026 could help lift consumer spending.
Given these factors, selectively buying Philippine stocks still makes sense despite the many global and local economic challenges.
Investors should manage risk by limiting position sizes, diversifying portfolios, and focusing on companies with growth potential, attractive valuations, and solid cash dividend yields.
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