Philippine equities are entering 2026 with a bruised valuation base but clearer opportunities after a year marked by calamities, corruption probes, and a Peso weakened by the narrowing interest rate gap between the Bangko Sentral ng Pilipinas and the US Federal Reserve.
First Metro Securities (FMS), in a Nov. 28 report prepared by research head Mark Angeles and Estella Dhel Villamiel, said the market is still weighed down by fragile confidence, but much of the valuation damage is already priced in, creating room for selective upside.
Limited downside ahead
It sees the PSE “at a crossroads,” with its base-case index target of 6,500, driven mainly by modest earnings growth rather than a major rerating.
Downside risk, however, remains contained, with a slide toward the 5,500 bear case only likely if confidence erodes further or the economy weakens more than expected.
When confidence returns
On the flip side, a bull case of 7,500 becomes attainable if governance reforms gain traction, public spending normalizes, macro stability returns, and foreign fund flows accelerate.
Foreign flows are already showing early signs of recovery, with rolling 52-week numbers turning positive as global sentiment toward emerging markets improves.
This creates a realistic path to the “road less travelled,” where stronger confidence narrows the valuation gap with regional peers.
Stock picks for 2026
Its defensive basket focuses on dividend-paying names with resilient cash flows—AREIT (P43.70), Globe Telecom (P1,880), Meralco (P650), PLDT (P1,490), Puregold (P49), RL Commercial REIT (P8.40), and Universal Robina (P95)—seen as anchors in a cautious market.
For the recovery scenario, it highlights large-cap cyclicals that could benefit if confidence turns, including Ayala Land (P28), Bank of the Philippine Islands (P143), BDO Unibank (P170), Jollibee Foods (P330), SM Investments (P880), and SM Prime (P28).
AI adoption is the third theme, with First Metro Securities flagging companies poised for productivity gains such as BDO (P170), Converge ICT (P20.30), Globe (P1,880), Meralco (P650), and PLDT (P1,490).
Barbell positioning
To navigate these competing paths, First Metro Securities recommends a barbell strategy—anchoring on dividend-paying defensives while keeping exposure to large-cap cyclicals that stand to benefit from an economic rebound.
Thus, its 2026 stock calls were grouped into three themes: defensives for stability, cyclicals for a confidence rebound, and early winners from AI adoption.
—Edited by Miguel R. Camus
