Stuck market

The Economist observed that the US stock market has seen a surge lately, fueled by enthusiasm around artificial intelligence.

But Gita Gopinath, former IMF chief economist, wrote in The Economist that “investors have good reasons to worry that the current rally may be setting the stage for another painful market correction. The consequences of such a crash, however, could be far more severe and global in scope than those felt a quarter of a century ago.”

Gopinath estimates that “a market correction of the same magnitude as the dotcom crash could wipe out over $20 trillion in wealth for American households, equivalent to roughly 70 percent of American GDP in 2024. This is several times larger than the losses incurred during the crash of the early 2000s.”

Then, there is JPMorgan Chase CEO Jamie Dimon who cautioned that despite the stock market’s strong performance, there may be masked issues that could spark a downturn like the 2008 financial crisis. He warned that there may be “cockroaches” in the US economy that could spell total meltdown.

There are trade tensions (especially US-China), political risks and inflation surprises that are contributing to current bouts of volatility. Another possible “cockroach” is Trump himself with his disruptive decisions.

What does all that mean to the rest of the world?

Gopinath points out in The Economist that the world has become dangerously dependent on American stocks.

“At the heart of this concern is the sheer scale of exposure, both domestic and international, to American equities… This growing interconnectedness means that any sharp downturn in American markets will reverberate around the world.”

So, why should Filipinos worry?

For one thing, when the US economy catches a cold, the rest of the world goes down with pneumonia. And our equities market has long been nursing a sort of long covid affliction.

Our rather puny, poor excuse of a stock market hardly affects the welfare of most Filipinos because listed issues are largely in the hands of an economic elite. PSE issues have found it difficult to meet the rather small 20 percent requirement for public float. Still, pain will be felt in an international crash.

Our equities market had already been more of a “stuck” market for quite a while. According to Trading Economics, the main stock market index, the PSEi, fell to 6,090 points on Oct. 17, 2025. Over the past month, the index has declined by 2.31 percent and is down by 17.88 percent compared to the same time last year.

PSE’s total market capitalization is P19.12 trillion as of Oct. 10, 2025. It ranks last among the original ASEAN 5 that excludes Vietnam which is, however, fast catching up.

Furthermore, Vietnam’s stock market reaches over 11 million accounts. In comparison, the number of stock market accounts in the Philippines reached 2.86 million in 2024.

The problem with the Philippine stock market is largely because it is seen as a speculative playground of tsupiteros rather than a genuine engine of long-term wealth creation. Market rumors can sometimes be more important than technical analysis.

Market analyst and Business Mirror columnist John Mangun wrote that “investing in the PSE can resemble dating someone brimming with potential but persistently unreliable, requiring constant vigilance and paying a high-maintenance bill for managing risks. The upside exists but it can be a relationship that costs more than it is worth.”

John is an American expat married to a Filipino and has settled here with his family. When I first met him a couple of decades ago, he was more Filipino than many Filipinos. He sent his sons to public school. Luckily, he was living in Makati where the public schools are better than some private schools.

When talking of our stock market or our economy, he saw silver linings where we could only see muck. But he also struck me as a pragmatist who saw things for what they are.

In a recent column at Business Mirror, John warned that “before you commit capital, ask: are you prepared for thin liquidity, weak governance, currency swings and long stretches of underwhelming returns? Because these are not hypothetical. They are real.

“Consider liquidity first. The Philippine Stock Exchange (PSE) suffers from low trading volume with average daily turnover of P6.1 billion for 2024 according to data from the Exchange itself – a mere fraction of what peers like Thailand (P74 billion equivalent) or Indonesia (P48 billion equivalent) routinely handle. Low liquidity means large orders move prices disproportionately and your ‘emergency exit’ can come at a steep discount.”

He observed that the common advice for investors to diversify their portfolio offers little safety in a market where the top ten stocks account for over 60 percent of total daily trading value.

There is more.

“Ownership concentration compounds the problem. Many publicly listed firms are dominated by families or small groups of shareholders whose combined stakes (often the three largest shareholders) exceed 50 percent of equity. This creates a pattern that weakens shareholder protections against hidden related-party transactions, nepotistic appointments and strategic decisions that prioritize family interests over shareholder returns.”

John made other important points about our stock market from his decades of experience here. This is the link to his column which I think is a must read: https://businessmirror.com.ph/2025/10/09/pse-stocks-for-success-or-for-suckers/

One last important point of John is governance. It remains uneven.

“While the Securities and Exchange Commission has made strides, disclosures can be delayed, board independence is often nominal and shareholder activism is rare…

“Strengthen corporate governance with real enforcement and credible regulation. Heavier fines – not a slap on the wrist – for late or incomplete disclosures and reporting. Publicly release PSE/SEC investigation results and sanctions so investors see accountability in action.”

The Philippine stock market will remain stunted and stuck compared to our ASEAN peers unless reforms happen. Like our country, reforms can take forever.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco