Despite jitters from recent market turbulence, First Metro Securities (FMS) Research, led by Mark Angeles and Estella Dhel Villamiel, advised investors to view pullbacks as buying opportunities, noting that much of the risks that caused the late 2024 sell-off were already priced in.
FMS sees the year-end 2025 “base case” of the Philippine Stock Exchange Index (PSEi) at 7,600—a roughly 16 percent upside from its 2024 finish of 6,528.79.
“In light of the recent market weakness, we double down on our call to accumulate Philippine risk assets. These levels should prove to be very good entry points for those with a time horizon of 12-24 months,” according to FMS Research.
Conditions favor the upside
FMS Research said the Philippine economy could grow by 5.8 percent in 2025, supported by easing monetary policy, robust domestic demand, public spending, and the upcoming midterm elections.
This will also support corporate earnings, which could further be lifted by lower financing costs and gains from a rapid shift to AI. Other positives include the potential removal of the Philippines from the FATF Grey List and lower sales taxes.
Shallower rate cuts a positive
FMS Research said inflation risks have made shallower rate cuts by the US Federal Reserve and Bangko Sentral ng Pilipinas a more likely scenario.
But this could favor Philippine stocks, it noted. “Drawing from past easing cycles, we note that more aggressive easing has led to significant underperformance of the Philippine equities market,” FMS Research said.
“This stems from the countercyclical nature of monetary policy, where sustained economic weakness will warrant more policy support from central banks,” it added.
Bottom is near?
FMS Research said the equity risk premium—the extra profit that investors would require to invest in stocks—has risen to almost 500 basis points. This is a level associated with “elevated risk conditions.”
“We view this level to be unsustainable. We see plenty of good news in the next 12 months. Barring a tail risk event, we argue for ERP compression in 2025,” it said.
What to buy?
FMS Research divided its top picks across key themes such as growth, elections, and AI.
It recommends Ayala Land Inc (Target price: P35.8), Bank of the Philippine Islands (BPI P155.0), BDO Unibank (BDO P167.0), Jollibee Foods Corp (JFC P330.0), Robinsons Retail Holdings (RRHI P47), SM Investments Corp (SM P1,150), and SM Prime Holdings (SMPH P36.0).
Friendshoring, AI
Stronger ties with the United States and allied nations under the Marcos administration could lead to “friendshoring” opportunities.
Beneficiaries include Ayala Land and Robinsons Land, given their developments near Clark, Pampanga, set to gain from the proposed Luzon Economic Corridor.
Greater AI adoption also favors stocks such as Converge ICT Solutions (CNVRG P20.5), JFC, and BDO.
Things could still go wrong
Weak economic data, escalating geopolitical conflict and unfavorable US policies toward the Philippines remain risk factors, FMS Research said.
For example, a proposed US bill (S.3516) could impose 10 percent tax on remittances, affecting flows from Filipino workers.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
