The equities faced a subdued market in the first quarter of 2025, as a lack of strong positive catalysts kept investor sentiment in check, the head of equities markets at the insurer Manulife said on Friday.
But no matter the weak start to the year, Manulife analyst Mark Canizares said there are intimations of hope in the horizon, particularly the lower-than-expected consumer price index (CPI) for February. The CPI averaged 111.78 points from 2018 until 2025 but was lowest at only 97.20 points in 2018, based on data at the Philippine Statistics Authority (PSA). This improvement in inflation figures, Canezares said, suggests that inflation risks are largely under control, potentially paving the way for policy rate cuts by the Bangko Sentral ng Pilipinas (BSP) in the first half of the year.
This event, should it materialize, could serve as a driver for the market, providing much-needed support to struggling equities, Canezares said. The Philippine Stock Exchange Index (PSEi) is currently trading at a price-to-earnings (P/E) ratio of approximately 9.5 times, signaling that stocks are relatively cheap although market conditions remain fragile. Given the absence of strong catalysts, analysts like Canizares remain selectively cautious, awaiting more positive developments that could materialize later this year.
The outlook for equities in the Philippines remains contingent on key economic factors, including a recovery in domestic demand, stability in the peso against the U.S. dollar, and the political landscape, especially with the upcoming midterm elections, Canizares said. A supportive policy environment post-elections could lead to increased consumer spending, particularly in the second half of the year, providing a much-needed boost for the market, he added.
In the interim, investors are advised to focus on defensive sectors like banks, utilities, and telecommunications, which are expected to perform well amid the ongoing uncertainty. As inflation risks recede and interest rates potentially lower, the latter part of 2025 may see a shift in investor focus toward consumer staples and discretionary sectors, which stand to benefit from improved economic conditions.
Overall, Canizares said, the market remains cautiously optimistic, with a clear focus on inflation, policy shifts, and key domestic developments that could drive a more favorable investment climate in the months ahead.
