‘Stock market poised for recovery this year’

MANILA, Philippines —  BPI Securities is looking ahead with cautious optimism, projecting a recovery in the Philippine stock market supported by falling inflation, anticipated interest rate cuts and improving consumption.

In its latest equity strategy report, BPI Securities sees the Philippine Stock Exchange index (PSEi) reaching 7,300 by the end of 2025, representing a 15-percent upside from current levels.

The report said the recovery would be driven by improving macroeconomic conditions and stronger prospects for cyclical sectors such as consumer, property and conglomerates.

“We are more upbeat toward 2026, especially for cyclical sectors (i.e. consumer, property and conglomerates), amid a benign inflation outlook and looser monetary policy environment,” it said.

The more positive outlook comes after a rough start to the year. As of end-May, the PSEi stood at 6,341, still down by three percent year-to-date, although it had managed to recover nine percent from its low in April.

BPI Securities said investor sentiment had been dampened by global economic uncertainty, particularly US trade protectionism, as well as disappointing Philippine gross domestic product (GDP) growth and lackluster corporate earnings in the first quarter.

Despite these challenges, BPI Securities believes conditions are improving. The index is trading at just 10 times forward earnings, far below its 10-year average of 17 times and close to COVID-era levels. The brokerage said this undervaluation, along with lower interest rates and softening prices of oil and rice, could help lift valuations and encourage greater consumer and business activity.

Private consumption remains the Philippines’ main economic driver, accounting for 78 percent of nominal GDP in the first quarter, compared to just 17 percent for exports. With direct export exposure to the US at only about three percent of GDP, the local economy is somewhat shielded from the impact of escalating trade tensions.

Estimated core earnings growth for PSEi-listed firms stood at 6.5 percent year-on-year in the first quarter. While this marks a slowdown from previous periods, the majority of companies under BPI Securities’ coverage posted results that were in line with or exceeded expectations.

Following earnings revisions, the brokerage now expects core earnings to grow by 7.9 percent this year, down from a previous forecast of 10 percent.

The strategy remains focused on bottom-up stock selection, as foreign investor flows remain subdued. BPI Securities is maintaining its view that resilient corporate earnings, lower inflation and additional monetary easing will support a re-rating in market valuations over the coming months.

However, the report also flagged several downside risks that could derail the recovery. These include potential supply shocks from an intensified trade war, fewer-than-expected rate cuts by the US Federal Reserve, which could limit the BSP’s ability to loosen monetary policy, and stricter US immigration policies that could negatively impact overseas Filipino remittances and business process outsourcing revenues.

Still, the overall message from BPI Securities is that the building blocks for a market rebound are taking shape, with more favorable economic conditions expected to benefit both businesses and consumers in the second half of the year and beyond.