— Why trust, not valuation, was the real drag
The Philippine stock market closed 2025 on a somber note — and for many investors, it is a year best left behind.
On the final trading day, the PSEi ended at 6,052.92, down 7.29% for the year, marking its most challenging performance since the pandemic crash of 2020. But this was not merely a story of weak numbers. It was, above all, a story about confidence, governance, and trust.
A market that fell short of expectations
At the start of 2025, optimism was not in short supply. Inflation was easing, rate cuts were on the table, and post-election stability seemed plausible. Yet as the year unfolded, those hopes steadily eroded.
According to Juan Paolo Colet, Managing Director at China Bank Capital, the local market:
“Underperformed most analysts’ initial base-case targets and lagged other regional stock markets.”
Several forces converged:
- A major corruption scandal linked to flood control projects
- Slowing GDP growth, with Q3 expanding only 4%
- Persistent peso weakness
- Global uncertainty stemming from US trade and tariff policies
- A steady withdrawal of foreign capital
Foreign investors ended the year as net sellers of around PHP 51 billion, continuing to exit local equities right up to the final trading session.
“This is not just about numbers”
The most telling assessment came from the exchange itself.
PSE President and CEO Ramon S. Monzon captured the mood succinctly:
“The PSEi’s decline this year is not just about numbers — it’s about trust and confidence.”
Markets can tolerate slow growth. They can even absorb currency volatility. What they struggle with most is uncertainty around governance and policy credibility. In 2025, that uncertainty became the dominant narrative.
For many investors, the question was no longer “How cheap are Philippine stocks?” but rather “What could go wrong next?”
Cheap — but lacking a catalyst
Ironically, by traditional valuation metrics, Philippine equities now look inexpensive:
- Forward P/E: ~9.7x
- Price-to-book: ~1.2x
These levels suggest limited downside. However, cheap valuations alone are rarely enough to spark a sustained rally.
As Unicapital Securities noted, absent a material improvement in sentiment or macro conditions, the index is likely to hover around current levels.
In other words: downside may be limited, but upside still needs a reason.
Peso weakness compounds the pain
Equities were not alone in struggling. The Philippine peso also closed 2025 weaker, ending at PHP 58.79 per US dollar, after briefly touching an all-time low of 59.22 earlier in December.
Drivers included:
- A strong US dollar supported by robust US growth
- Narrowing interest rate differentials
- Capital outflows linked to equity market weakness
- Lingering concerns over governance and political risk
While remittances helped cushion the fall, they were not enough to reverse sentiment.
Looking ahead to 2026: conditional optimism
Despite the bruising year, the outlook is not uniformly bleak.
There are real positives:
- Corporate earnings remain broadly resilient
- More listings are expected
- Inflation is contained, giving the BSP room to cut rates further
- Domestic consumption remains relatively strong
The consensus view is cautious but not hopeless. A meaningful recovery hinges on one key factor:
Restoring confidence through credible governance reforms and policy execution.
If that happens, the Philippine market could surprise on the upside in 2026. If not, it risks remaining trapped in a low-valuation, low-confidence equilibrium.
PinchuTV’s takeaway
2025 reminded investors that markets are not driven by valuation alone.
They are driven by belief — belief in institutions, policy, and direction.
From a long-term perspective, the Philippines still has:
- Favorable demographics
- A consumption-led economy
- Companies with durable franchises
Periods like this are uncomfortable, but they are also when long-term opportunities quietly form.
As sentiment resets and the dust settles, the key question for 2026 is simple:
Can trust return faster than capital left?
That answer will determine whether 2025 was merely a painful pause — or the prelude to a stronger cycle ahead.