Philippine stocks set for rebound after corruption slump – Maybank

Local equity markets are likely to recover in 2026 after last year’s performance was weighed down by the flood control scandal, according to Maybank Securities Philippines Head of Equity Research Kervin Sisayan.

Speaking at a webinar on Tuesday, 20 January, Sisayan said the local bourse is poised for a bounce-back year after being significantly hampered in 2025 by the onset of the corruption controversy.

“Obviously the biggest elephant in the room is that we've just gone through a big corruption issue [with the] flood control [scandal last year],” Sisayan said.

“So that has been, I would say, one of the biggest reasons for the underperformance of the Philippine equity markets in 2025,” he added.

The Philippine Stock Exchange Index (PSEi) ended 2025 at 6,052.92, down 475.87 points from end-2024 — a 7.29 percent year-on-year decline and its weakest year-end finish since 2013. The index also ranked last among its regional peers, as markets in South Korea, Japan, and Singapore outperformed amid relatively lower political uncertainty.

Sisayan noted that the PSEi has historically shown resilience in the years following major political scandals. While governance issues often trigger short-term volatility, he said medium-term market performance is typically driven more by global liquidity, macroeconomic fundamentals, and risk appetite than by politics alone.

“If we look at the past 20 years we can always see that every time that there has been a big [political] issue on the national level, we see a good and strong recovery the following year,” Sisayan said, citing the “Hello Garci” scandal in 2005 and the Priority Development Assistance Fund (PDAF) controversy in 2013.

The “Hello Garci” scandal erupted in mid-2005 amid allegations of vote-rigging in favor of then-President Gloria Macapagal Arroyo during the 2004 elections. That year, the PSEi closed at 2,096.04, up only 273.21 points from the previous year, with year-on-year growth shrinking by 11.4 percent.

In 2006, however, the market rebounded sharply, surging 886.50 points or 42.3 percent. The recovery was driven by improved risk appetite, higher government revenues from the implementation of the Expanded Value-Added Tax (EVAT) law, peso stabilization, and resilient domestic consumption supported by overseas Filipino worker remittances.

A similar pattern followed the PDAF scandal of 2013, which involved allegations of widespread misuse of lawmakers’ pork barrel funds. That year, the PSEi closed at 5,889.83, up a modest 77.1 points, or less than 1 percent, from the previous year. In 2014, the index jumped 1,340.74 points to 7,230.57, breaching the 7,000 level for the first time amid strong capital inflows, robust GDP growth, and a boom in real estate and business process outsourcing.

Sisayan said the current political crisis also presents opportunities, as depressed valuations have opened the door for bargain hunting. He noted that the PSE’s earnings yield, which typically tracks the 10-year government bond yield, has decoupled, with the last gap of this magnitude seen during the COVID-19 pandemic.

“Investors are pricing in as if there is a crisis right now, given all the volatility and concerns on the peso, concerns on the government spending and corruption that we've seen for the past year,” he said.

“That tells me there's a lot of opportunity as well in investing in the Philippines, because if we are being priced at crisis levels, then that also means that there's a lot of opportunity for upside for Philippine equity markets because we are trading at very cheap valuations,” he added.

Sisayan said the Philippine economy still has bright spots, including resilient consumer demand driven by OFW remittances, low headline inflation, and the potential for a property-sector recovery. However, he stressed that governance reforms are essential to restoring investor confidence.

“We are the cheapest market already in ASEAN, and one of the biggest underperformers in Asia, and also the world,” he said.

“We need a resolution to the flood control projects and the corruption issues last year. Maybe we'll see that effect in the first half of this year to bring back the confidence of foreign investors to [the] Philippines in general.”