The good and the bad of the market’s 2025 performance

Contrary to our initial expectations, the PSEi index declined by 7.3 percent in 2025.

Despite attractive valuations at the start of the year, the market failed to rebound as both economic growth and corporate earnings disappointed.

During the first nine months of the year, GDP growth averaged only 5 percent, well below the government’s full-year target of 5.5-6.5 percent.

This underperformance came despite several supportive factors, including 2025 being an election year—historically favorable for consumer spending—the passage of the CREATE MORE bill, which was expected to boost foreign direct investments, and the decline in inflation and interest rates, which should theoretically support both consumption and investments.

Corporate earnings similarly fell short of expectations.

Median earnings growth of COL-covered companies was only 5.7 percent, while 47 percent of the companies under coverage delivered weaker-than-expected profits.

In addition to the weak economic backdrop weighing on revenue growth, profitability was further pressured by higher costs across many sectors.

Consumer and gaming stocks were among the worst performers during the year. Shares of consumer companies that we cover declined by a median of 12.7 percent, while those of gaming plays fell by a median of 39 percent.

The underperformance of consumer stocks reflected their weak earnings delivery.

During the first nine months of 2025, earnings of consumer companies under coverage declined by a median of 1.6 percent, with 64 percent missing expectations.

Profitability was weighed down by low-single-digit revenue growth, rising raw material costs and negative operating leverage.

Although not a consumer company, SM fell sharply by 21 percent last year as sentiment for the stock was negatively affected by the poor performance of its retail subsidiary, SM Retail.

Meanwhile, gaming plays declined as casino operators like BLOOM suffered from lower gross gaming revenues.

According to data from Philippine Amusement and Gaming Corp., gross gaming revenues from licensed casinos fell by around 10 percent in the third quarter after dropping by almost 6 percent in the first half.

In addition, online gaming plays, such as PLUS and GLO (through its e-wallet GCash), were negatively affected by the Bangko Sentral ng Pilipinas’ directive ordering supervised financial institutions to remove in-app links and features that promote or allow access to online gambling sites.

That said, there are important nuances to the market’s 2025 performance that point to a less pessimistic picture.

Despite the sharp decline in the index, market breadth was slightly positive, with 140 gainers versus 137 losers.

Moreover, the median return of stocks that ended the year in positive territory was 24.2 percent, significantly larger than the median decline of 16.3 percent among stocks that finished in the red.

This asymmetry is likely due to stocks’ depressed valuations, suggesting that negative factors were largely priced in.

As a result, there was greater upside in share prices from positive surprises than downside from further disappointments.

Stocks that generated positive returns in 2025 generally fell into three categories: gold miners, strong earnings performers and high dividend payers.

Gold mining stocks more than doubled during the year, benefiting from the 65 percent surge in gold prices as well as their depressed valuations at the start of 2025.

Notably, APX and PX more than tripled, while LC, OGP and MA posted gains of over 100 percent.

Meanwhile, companies that delivered strong earnings growth saw their share prices rise by more than 20 percent.

This group includes ICT, CREC, EW and MER, all of which posted double-digit earnings growth during the first nine months of the year. Notably, ICT, EW and MER also exceeded market expectations.

High dividend-paying stocks likewise performed strongly as falling interest rates improved their relative attractiveness versus fixed-income instruments, such as time deposits and bonds.

This group includes power and utility companies, such as AP, MER, MWC and MYNLD, and real estate investment trusts, such as RCR, CREIT, AREIT, FILRT and MREIT.

In addition, companies that initiated cash dividends or increased payouts meaningfully versus historical levels also enjoyed strong share price performance.

These include Philippine National Bank, which paid out cash dividends for the first time in almost 10 years, and PGOLD, which increased its dividend payout from 30 percent of the previous year’s profits to 50 percent last year.

Overall, the strong performance of these three groups underscores that fundamentals also matter in the Philippine stock market.

Despite a generally weak market, companies that trade at attractive valuations, deliver robust earnings growth and actively unlock shareholder value through cash dividends are still able to generate strong share price performance.

As such, investors should avoid being discouraged and instead focus on buying companies with these qualities to achieve attractive returns.