Speaking during Abacus Securities’ mid-year 2026 market briefing, Franco said investors should focus on selective opportunities in consumer, energy and construction while staying underweight on gaming and real estate investment trusts.
“There's a good possibility that valuations have really reached the low point and that downside is finally limited at this point. Again, however, [significant valuation] expansion is unlikely because of the negative macro backdrop,” he said.
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Among cheapest in Asia
Franco said the Philippine market remains among the cheapest in Asia and the broader emerging markets after years of valuation compression, suggesting downside risks are becoming increasingly limited.
He said the market’s ability to stay above last year’s valuation lows despite the recent energy shock points to the possible end of the prolonged “valuation recession.”
Still, elevated inflation, high interest rates, weak economic growth, a stronger US dollar and continued foreign selling are likely to prevent a meaningful rerating of Philippine equities.
More than two-thirds of listed companies have already suffered earnings downgrades this year, with second-quarter results expected to take the biggest hit from higher energy costs following the Iran conflict.
Even so, Franco believes much of the bad news has already been priced in after roughly two-thirds of PSE index constituents fell at least 10 percent from late February.
“We are tactically defensive, but we find pockets of opportunity, stability and value in a few sectors or individual names,” he said.
—Edited by Miguel R. Camus
