‘Outlook dimmed by weak data’
Two major stock brokerages have trimmed their year-end forecasts for the Philippine Stock Exchange index (PSEi), citing subdued corporate earnings, weak foreign investment inflows and persistent global uncertainty.
Disappointing FDIs and tepid earnings, in particular, have weighed down investor sentiment and kept valuations under pressure.
Online brokerage COL Financial lowered its PSEi target to 7,700 points from its earlier forecast of 8,100, while Abacus Securities cut its projection more sharply to 6,900, down from 8,500.
COL Financial head of research April Tan said the downward revision reflects unmet expectations around foreign direct investment (FDI), particularly following the enactment of the CREATE MORE Law (RA12066) last year.
Government data showed that FDI fell 41.1 percent year-on-year in the first quarter of 2025, dropping to $1.76 billion from $2.99 billion a year earlier.
“We were hoping that FDI inflows would support a rerating of the market,” Tan said during COL’s midyear market outlook briefing on July 6. “Unfortunately, we did not see that. So we’re cutting our target.”
Tan added that corporate earnings so far this year have been underwhelming. Median earnings growth stood at 6.4 percent, while key sectors such as telcos and power declined 5.8 percent and 28.3 percent, respectively.
She also pointed to weak business sentiment, driven in part by uncertainty over the U.S. trade policy under President Donald Trump, whose 90-day grace period before new tariffs take effect expires on July 9.
Abacus Securities head of research Nicky Franco echoed the cautious tone, citing volatile external conditions and weak valuations.
“The uncertainty and volatility caused by Trump’s trade policy will likely keep foreign investors at bay,” Franco said at a separate briefing last week. “We’ve downgraded our PSEi target to 6,900.”
Franco said the local market remains one of the cheapest in Southeast Asia, trading at 10x forward P/E, and is now in the bottom quartile of all emerging markets.
“The PSEi still needs foreign capital to move valuations higher,” Franco noted. “And we don’t think hot money will return anytime soon. Without it, the index will rely on earnings growth, which has also been underwhelming.”
Franco, however, sees potential upside if the macro environment improves.
Benign inflation and a weaker dollar could give the Bangko Sentral ng Pilipinas more room to cut interest rates in the second half.
“We still expect two more rate cuts — likely in October and December — and there’s room for more easing into next year,” Franco added.
