The Philippine Stock Exchange index (PSEi) ended May at 6,341, marking a 9 percent rebound from its 7 April low but still registering a 3 percent decline year-to-date, the securities unit of the Bank of the Philippine Islands said in a research note Thursday. The modest recovery comes amid lingering global uncertainties, particularly the escalating U.S. trade protectionism measures, which have dampened investor sentiment. Locally, a disappointing first-quarter GDP print and a muted corporate earnings season have kept upside momentum in check.
Private consumption continues to anchor economic activity, contributing 78 percent to nominal GDP in 1Q25, far outweighing the 17 percent from exports. The economy’s limited direct exposure to U.S. trade (approximately 3 percent of GDP) offers some insulation from the intensifying trade war. Meanwhile, easing inflation, driven by lower rice and oil prices, and the recent depreciation of the U.S. dollar are seen supporting consumer spending and economic recovery.
Expectations of continued monetary policy easing by the Bangko Sentral ng Pilipinas (BSP), with three rate cuts forecasted this year, are creating a more accommodative environment for both consumers and businesses. Lower borrowing costs are expected to spur domestic demand and support corporate valuations, offering a positive backdrop for equity investors.
Core earnings growth for the PSEi was estimated at 6.5 percent year-on-year in the first quarter, with most BPI Securities-covered companies meeting or exceeding expectations. However, sector-specific softness—particularly in consumer, conglomerates, and telecom—has led to a downward revision of full-year core earnings growth to 7.9 percent (from 10 percent). Still, optimism is building for 2026, especially for cyclical sectors, supported by a more favorable inflation and rate environment.
BPI Securities now sees the PSEi ending 2025 at 7,300, down from a prior 7,600 forecast, implying a 15 percent upside from current levels. The forward price-to-earnings ratio of 11.6 times remains below the 10-year average and close to pandemic-era valuations. The firm continues to favor a bottom-up stock picking strategy, highlighting top picks such as AC and SM (consumption plays), CNPF and CNVRG (growth-oriented), and MWC, PGOLD, and RCR (dividend yield and stability).
Key downside risks include spillover effects from a worsening U.S.-China trade war, a shallower U.S. Fed rate-cutting cycle that could limit the Bangko Sentral ng Pilipinas’s easing room, and potential U.S. policies impacting overseas Filipino worker remittances and BPO sector earnings.
