Philippine Stock Exchange Analysis: World's Worst Market Performance and Recovery Challenges

The Philippine Stock Exchange Index (PSEi) represents an unprecedented case of market underperformance, declining approximately 17% since 2015 while the Philippine economy continued to expand and corporate profits grew [5]. This stark divergence from regional peers, who gained approximately 70% during the same period, highlights deep structural and governance issues that have severely damaged investor confidence [5].

As of November 7, 2025, the PSEi closed at 5,759 points, representing a 1.31% decline from the previous session [3]. The index has fallen 5.56% over the past month and 17.45% compared to the same time last year [3]. More concerning, the market recently hit a three-year low amid souring sentiment following a sharp slowdown in economic growth tied to corruption scandals [3]. The current level represents a significant decline from the 2018 peak of over 9,000 points [5].

The Philippine market faces several interconnected structural problems:

: The market suffers from concentration in few sectors, limiting investor options and creating systemic risks [5].

: Average daily trade value has declined dramatically from PHP9.0 billion in 2021 to PHP6.1 billion in 2024, indicating evaporating market participation [2].

: Only 3 new listings occurred in 2024, offset by the same number of delistings, creating a stagnant market ecosystem [2]. The market raised only $1.4 billion in 2024 through IPOs [1].

: Foreign investors have largely abandoned the market, creating a confidence vacuum that depresses valuations and liquidity [5].

A major corruption scandal has further eroded investor confidence, with GDP growth slowing to 4.4% year-over-year in Q3 2025, the slowest pace since early 2021 [3]. This reflects reduced public spending tied to an infrastructure-related corruption probe and disruptions from successive typhoons [3]. The disconnect between economic fundamentals and market performance suggests that governance issues rather than economic weakness are the primary driver of underperformance.

Philippine equities currently trade at roughly nine times earnings, far below the historical average of fifteen and well under the regional average of thirteen to fourteen [5]. This significant discount reflects weak confidence rather than fundamental value concerns, potentially creating a contrarian opportunity for patient investors willing to tolerate continued volatility.

The PSEi’s decline stands in stark contrast to global market performance:

• S&P 500: +226.82% over the past decade [0]
• NASDAQ Composite: +383.26% over the past decade [0]
• Dow Jones Industrial: +163.03% over the past decade [0]
• Indonesia’s Jakarta Composite Index: +83% over the same period [5]

This comparative analysis reveals that the Philippines’ underperformance is not a regional phenomenon but a country-specific crisis.

• Market Cap
  : Approximately $325 billion as of March 2025 [1]
• Listed Companies
  : 286 companies [1]
• Foreign Investment
  : FDI inflows reached $8.9 billion in 2024, unchanged from 2023 [1]

The relatively small market size and limited company base contribute to liquidity challenges and make the market more susceptible to capital flight.

: The ongoing corruption scandal could further erode confidence if not addressed transparently [3]. This represents the most significant barrier to market recovery.

: Peso depreciation against the US dollar adds additional pressure on the market and foreign investor returns [3].

: Failure to implement meaningful reforms could prolong the downturn indefinitely, as structural issues require decisive policy responses.

: Continued foreign outflows may depress liquidity further, creating a negative feedback loop that becomes increasingly difficult to reverse.

: The significant valuation discount at 9x earnings versus 15x historical average may attract value investors if governance improves [5].

: Major regulatory reforms by the SEC and PSE could restore confidence and attract new listings [4].

: Watch for major listings like the delayed GCash IPO (postponed to 2026) as potential market catalysts [4].

: Net positive foreign transactions would indicate renewed confidence and market recovery [2].

Market recoveries from prolonged downturns typically require strong regulatory responses, as seen after 1929 when the SEC was created to restore trust [9]. Most market crashes in history have eventually recovered, though recovery periods vary significantly [8][9]. The key is addressing underlying structural issues rather than symptoms [5].

. The market’s poor performance despite strong economic fundamentals suggests deep-seated structural and governance issues that must be addressed before sustainable recovery can occur.

The Philippine Stock Exchange represents a complex case of market failure driven by structural and governance issues rather than economic weakness. The 17% decade-long decline amid economic growth highlights severe confidence problems. Current valuations at 9x earnings suggest potential value, but recovery requires comprehensive reforms addressing governance, market diversity, and IPO activity. Investors should monitor corruption scandal resolution, regulatory reforms, and foreign investment flows as key recovery indicators. The market’s future depends on restoring trust through transparent governance and structural improvements rather than waiting for economic fundamentals to drive recovery.