Buying the dip: In search of the PSEi’s elusive inflection point - Rappler

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The critical inflection point of the stock market at this time seem to appear to be still too far from showing up. As of the end of August, the Philippine Stock Exchange index or PSEi ranked as the “second worst performer” in the Southeast and East Asia region, saved by Thailand for taking the main title.  

Meanwhile, the ASEAN+3 Macroeconomic Research Office (AMRO) revised its projections on the Philippine economy. From its new calculations, the country will just grow by 3.4% in 2026 instead of its previous estimate of 4.1% — also dimming the prospects for the critical inflection point of the economy from manifesting this year. 

Under such ranking and economic projection, the PSEi was down 1.6% year-to-date (YTD) and down 3.78% year-on-year (YoY) by the end of August. These results allowed even neonate Vietnam to easily overtake the Philippines in total market capitalization.

However, by the end of trading for the week ending September 11, the market managed to break out into positive territory, and registered a respective YTD and YoY marginal gains of 0.15% and 0.29%, driven by bargain hunting and influx of foreign net buying.  

This minor rally nudged the market again higher on Monday the following trading week on September 14. As a result, the market’s YTD and YoY performance again respectively advanced further into positive territory.  

But the market lost its footing and gave up all its little gains the following day when it closed on Tuesday, September 15, at 6007.78, down 1.11% or 67.29 points, which seemed to demonstrate that the fogs of the market and the economy are just too heavy yet from lifting. 

The fall continued the following day, Wednesday, September 16. The market slipped lower into negative territory by another 1.51% or 90.84 points when it closed at 5,9167.94, plunging below the designated 5,950-point psychological support level of the PSEi. 

In contrast, the market performances and growth standings of the other countries across the region present a highly different picture than ours. China, which takes the top billing, is currently driven by immense domestic economic optimism as its state-backed push into hyper-localized technology has turned its stock markets into a major growth engine. The key equity indices are now reportedly at their four-year peak.  

In hindsight, due to strict US trade curbs and export restrictions on advanced semiconductors, China shifted its national mandate toward total technological self-reliance. This forced a massive wave of “domestic substitution,” prompting Chinese tech firms to innovate using localized hardware and software ecosystems. 

China also aggressively scaled its production of the basic building blocks of hardware and software that make it possible to build, train, and run AI, so that even as Western brands assemble servers globally, a significant portion of the internal hardware components are sourced directly from Chinese suppliers, triggering a 25% surge in high-tech exports. Among these are the specialized computer chips, like GPUs (Graphics Processing Units) and TPUs (Tensor Processing Units), that do massive amounts of math at the same time. Likewise, China is producing high-speed digital storage systems that hold massive amounts of information safely and let computers grab that data instantly, together with ultra-fast cables and connections that let different computers talk to each other without delays. 

China became also successful in making programming frameworks and systems that give developers an environment to write code and test their AI models.  

This localization frenzy has translated into explosive financial performance for tech-heavy mainland exchanges, surging fourfold year-on-year.

Nevertheless, there are two major structural risks experts are worried about in China’s market and economy. They find that many mainland AI listings on the STAR 50 are heavily overvalued, pricing in years of frictionless growth. And because the state prioritizes cheap AI deployment over corporate pricing power, local AI software providers face capped profit margins that may as well translate into a slow down or plateau of economic activities.

In Malaysia, all seems to look good. It has emerged as one of Southeast Asia’s standout growth story. Its GDP is expanding at 6%. Its equity market is also enjoying a bumper period as it has taken the top spot to lead in Southeast Asia’s IPO market by raising US$1.3 billion across 36 listings.

Vietnam is another great story. Its economy in the second-quarter of 2026 appeared sterling. Its GDP surged to 8.39% year-on-year. This makes its status as the region’s No. 1 economy, expanding at the absolute upper-bound of economic models despite export-reliance vulnerabilities.

Taiwan and South Korea have experienced prominent economic and stock market rallies.  Both nations heavily rallied on the back of relentless global demand for advanced semiconductors, hardware infrastructure, and AI-related supply chains.

Singapore sustained a robust 5.9% growth rate. Backed by powerful fiscal buffers, its stock exchange (SGX) staged a significant turnaround fueled by strategic equity development programs. 

Internal and external factors are said to be holding down the PSEi and the Philippine economy, with the former getting more of the blame. In particular, the country’s domestic structural issues are held more accountable for the market’s weakness rather than by the global macroeconomic factors that are presently pestering the economy.     

On top of the list is systemic corruption. Like the massive flood-control corruption scandal in late 2025, this chilled state-driven infrastructure and public-private builder confidence that starved critical national infrastructure and needed investments.  

Next is the skipping of industrialization for services. This left the country with logistical bottlenecks and weak domestic supply chain that made it highly dependent on imports and overseas remittances. The country failed to achieve manufacturing scale that could ramp up domestic production, offer stable jobs, and create credible supply chains, so much so that millions are forced into low-paying, informal work, or must leave their families to work abroad as Overseas Filipino Workers (OFWs).

Then, there’s high electricity rates and urban gridlock. They are making doing business incredibly expensive with households also forced to face one of Asia’s highest electricity and water bills, shrinking take-home pays. On traffic gridlocks, commuters lose out to commuting hours, destroying their work-life balance.

Another deep-rooted structural issue is the perpetration of political dynasties. This has created feudal patronage networks that shield monopolies and block progressive fair market reforms.

Adding to the problem is the country’s outdated educational curricula and crumbling school infrastructure. They continue to cause workforce-skills mismatches as they trap the people from learning appropriate modern skills. Together, these structural economic flaws directly impact the economy and the daily lives of the populace, preventing sustainable economic and market growth.

The way things look at present, some economies in the Southeast and East Asia region are experiencing accelerated economic and market health. What stands out is that these countries are tech-centric and manufacturing-heavy countries. They are driven primarily by technology demand, artificial intelligence (AI) supply chains, and robust domestic activity. They are decoupling and leaving behind countries like the Philippines who are heavily reliant on oil imports or suffering from muted consumer activity.

Worse, foreign institutional investors have largely marginalized the local market, resulting in a net foreign selling total of P25.09 billion during the first eight months of 2026 alone. The Philippines registers the lowest average daily trading value in ASEAN, averaging roughly $100 million, giving global funds fewer incentives to enter. 

Does this mean that all is lost? Not exactly, I believe. The market and the economy may appear dim at the moment but behind are compelling data that show some great opportunities. The primary pillar of this assertion is extreme valuation compression and “deep value” play. The PSEi currently trades at an incredibly lean forward price-to-earnings (P/E) ratio of just 10.6x. To put this in perspective, this represents a massive discount compared to its historical 5-year average of 14.4x, and it sits far below the broader regional emerging market average of nearly 19.0x.

There is defensive support from technically called “strong hands” that is actively cushioning the market from a total breakdown as there are high-dividend dividend-paying giants like utilities, consumer staples, and REITs that continue to generate steady cash-flow yield despite the weak index. 

The 10.6x P/E of the market and 3.4% GDP growth estimate for the economy this year could just be the worst they could be. This may include the ongoing low foreign exchange rate parity of the Philippine peso to the US dollar at P62 to P63 and the price of oil at USD$100/bbl or so. The market and the economy have been in far more worst situations. Both held on.

\More importantly, beneath the messy macroeconomic surface lies surprising microeconomic resilience. Despite the macro downgrade cycles, the market’s benchmark-member companies are still expected to deliver solid corporate bottom-line growth. In addition, the long-term growth perspectives of the market and economy are still intact. Thanks to the manufacturing sector which grew by 2.6% YoY in the second quarter of 2026, serving as one of the key contributors to the overall national GDP growth of 2.3%, with the semiconductors accounting for 50% of total exports.  

At the rate opportunities are presenting themselves in the country today, the Philippine is at the cusp of turning into a tech-oriented market and a manufacturing hub economy, among other things. The government, however, may have to be more decisive for them to precipitate and stick permanently.

The stock market and the economy are now at the inflection point where investors could find high-quality stocks that operate as natural hedges against a weakening peso — cash-generative stocks at single-digit or low double-digit earnings multiples, digital and AI stocks (the GCash IPO is scheduled to proceed early next month, October), and domestically insulated monopolies or highly inelastic consumer stocks that could translate into a perfect classic example of “Buying the Dip.” – Rappler.com

(The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach the writer at densomera@yahoo.com)