Phl equities market at a crossroad

First Metro Securities Brokerage Corp., in its Nov. 28 Market Focus report produced by Mark Angeles and Estella Villamiel, sees the Philippine equity market standing at a crossroads.

- MARIANNE GO

According to the report, Philippine equities have underperformed regional peers year-to-date, sliding to a five-year low in mid-November. This weakness, the Metrobank Group brokerage firm pointed out, reflects confidence shocks stemming from a series of calamities and ongoing corruption probes that disrupted both public and private sector activity.

Additionally, the report said, a narrowing interest rate differential between the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve (Fed) weighed on the peso, pushing the currency near historic lows.

While corporate earnings have broadly met expectations, the report said, valuations remain depressed, with equity risk premia elevated near crisis levels and underscoring a cautious investment environment.

Looking ahead to 2026, they project an index target range of 5,500 to 7,500, with a base case of 6,500. For now, they observe that the market appears poised to take the familiar route: a “muddle-through” path as caution persists over the next 12 months.

However, First Metro Securities sees an 8.9 percent upside toward their base case scenario, but this will come from moderate EPS (earnings per share) growth, reflecting a soft macro environment, rather than meaningful valuation expansion.

As such, the brokerage firm expects ERP (equity risk premium) to remain elevated at 600 bps, as uncertainties over macro stability and confidence issues linger. The implied forward P/E (price to earnings) of 9.8x suggests only marginal improvement from current levels. It added that much of the valuation damage has been priced in, so that any underperformance will be limited.

Despite First Metro Securities’ cautious stance, they believe a return of confidence could unlock a more constructive outcome. With negatives already understood by the market and risk appetite fragile, a modest sentiment shift is more likely to catalyze a positive outcome than a negative one.