Buoyed by lower interest rates, regulatory reforms, and more stable economic conditions, the Philippine stock market could be well on its way to a gradual rebound this year.

Investment & Capital Corp. of the Philippines (ICCP) President and COO Manny Ocampo said Tuesday the recent rally in the index signals a “catch-up” phase compared with regional markets and leaves room for further gains, provided there are no major external shocks.

“We are cautiously optimistic for the market, maybe looking at the PSE Index hitting 7,000 for 2026, bearing no big negative surprises,” Ocampo said. He added that lower borrowing costs should boost consumption and spending, which supports overall market sentiment.

Still, Ocampo warned that volatility may appear once companies release full-year 2025 results, which could "surprise on the downside" after slower business activity in the third trimester of last year amid corruption and other disruptions. He said this may trigger profit-taking even as the market’s broader trajectory remains positive.

From a macro perspective, ICCP expects this year to be a year of consolidation rather than sharp swings, with inflation remaining manageable and energy costs easing as renewable projects come online.

“Starting this year, we will see a lot of the renewable energy projects coming online,” Ocampo said. “That should have a positive impact on energy costs overall.” He added that the shift to non-fossil fuel energy will benefit both businesses and consumers.

Regulatory reforms are another key driver. Ocampo highlighted amendments to real estate investment trust rules that expand eligible assets beyond traditional office and retail properties.

“The SEC (Securities and Exchange Commission) is pretty much opening the doors wide open for tollways, water systems, data centers, telecom towers, and even fiber optic networks,” he said, describing the shift toward infrastructure-focused rules as “very progressive” because it allows companies to recycle capital efficiently for high-spending projects.

Ocampo also suggested that declining fixed-income yields make this a "good time to bet on equities," advising investors to allocate about 20 percent of their portfolios to stocks while keeping some cash as "dry powder."

ICCP is optimistic about the primary market as well, with four companies reportedly in the initial public offering pipeline—doubling last year’s two listings. Firms in construction, retail, and renewable energy are expected to tap the market.