Philippine Stock Exchange: World's Worst Market Performance Analysis

The Philippine Stock Exchange Index (PSEi) has experienced a catastrophic 20% decline over the past decade, making it the world’s worst-performing major stock market according to Bloomberg data [1][3]. This dramatic underperformance has occurred despite the broader Asia-Pacific region gaining 72% and neighboring Indonesia’s Jakarta Composite Index surging 82% over the same period [1][3]. As of November 7, 2025, the PSEi closed at 5,759.37 points, down 1.31% from the previous session [0], representing the weakest performance in Asia with an 11% year-to-date decline.

The Philippine market suffers from several critical structural issues that have created a perfect storm of investor disengagement:

: The MSCI Philippines Index contains only 11 members, with over two-thirds concentrated in financials and industrials [1][3]. This contrasts sharply with neighboring markets like Malaysia, Indonesia, and Thailand, which have more balanced sector representation including consumer, technology, and healthcare companies.

: The market has experienced a critical lack of new listings. Only one company, fuel trader Top Line Business Development, has gone public in 2025 [1][3]. Major planned IPOs have been delayed, including casino operator Hann Holdings (up to ₱11.8 billion IPO postponed from September) and fintech giant GCash (delayed until second half of 2026) [1][3].

: Over the past five years, newly listed Philippine companies have seen their shares drop by approximately one-third on average, compared to a nearly 50% increase across Southeast Asia [1][3], creating a negative feedback loop for market participation.

Daily trading volume averages barely ₱5 billion, representing only a fraction of Indonesia’s ₱40 billion or Thailand’s ₱30 billion [6]. This liquidity drought reflects profound investor hesitation to commit long-term capital to the market. 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 [6], indicating a significant discount driven by weak confidence rather than value opportunities.

There’s a concerning disconnect between corporate fundamentals and market performance. Despite strong financial results, major companies have seen their shares decline:

• Semirara Mining & Power
  : Net income jumped over 80% in the past decade, yet shares have slid [1][3]
• DMCI Holdings
  : Profits rose nearly 50% over the same period, but shares fell more than 9% [1][3]

This suggests that market weakness is driven more by structural and confidence issues rather than poor corporate performance, indicating a systemic market psychology breakdown.

PSE CEO Ramon Monzon stated, “What is the most important ingredient in the stock market? Confidence. But there is none” [1][3]. This represents a fundamental breakdown in market psychology that cannot be solved through traditional value investing approaches. Eduardo Francisco, president of BDO Capital & Investment, warned, “The risk is the Philippines might become so marginal, people will stop looking at us” [1][3], suggesting potential permanent capital market damage.

Isidro Consunji, chairman of major corporations, noted that “Foreign investors don’t pay attention to the Philippine stock market” [1][3], indicating a systemic loss of international interest that could be difficult to reverse. This disengagement creates a self-reinforcing cycle where low liquidity discourages participation, further reducing liquidity.

: The Philippine market risks becoming so marginal that international investors permanently exclude it from their investment universe, making recovery increasingly difficult [1][3].

: While the Securities and Exchange Commission, under Chair Francis Lim, acknowledges structural and integrity issues and is pushing for reforms [1][3][5], the effectiveness and timeline of these measures remain uncertain.

: Continued low trading volumes could lead to wider bid-ask spreads, higher transaction costs, and further investor exodus, creating a vicious cycle of declining market quality.

1. Maynilad Water Services IPO
   : Potentially the largest since Monde Nissin’s 2021 debut, this will serve as a critical litmus test for investor appetite [1][3]
2. SEC Reform Implementation
   : Effectiveness of new guidelines for foreign investors and state-owned enterprise listings
3. Corporate Governance Improvements
   : Progress in addressing integrity concerns that have damaged market reputation
4. Liquidity Metrics
   : Trading volume patterns and foreign investment flow data

The case of Carl Edison Balagtas, who invested half his monthly salary since 2016 only to see his strategy fail spectacularly, illustrates how conventional long-term investing approaches have been ineffective in this market environment [1][3]. This represents a fundamental challenge to traditional investment wisdom and suggests that patience alone may not be sufficient strategy in structurally broken markets.

The Philippine stock market’s decade-long underperformance reflects deep structural problems rather than cyclical factors. Despite strong corporate earnings, the market suffers from extreme concentration, IPO drought, liquidity crisis, and evaporated investor confidence. The market trades at significant valuation discounts while facing marginalization risk as international investors increasingly disengage. Current reform efforts by regulators and the exchange may be insufficient without addressing fundamental confidence issues. The upcoming Maynilad IPO will serve as a crucial test of whether the market can begin rebuilding investor trust and participation.