Philippine stocks set for recovery

AFTER a bruising period marked by slower growth and shaken confidence, the Philippines’ stock market enters 2026 with attention shifting from damage control to potential repair.

Expectations remain subdued, but the focus increasingly turns to whether stabilising macro conditions, policy adjustments, and low valuations can set the stage for a change in direction.

Against that backdrop, Maybank Investment Bank Group Research (Maybank IBG)sees the year ahead as one where sentiment and fundamentals no longer move decisively against investors, noting that the outlook for 2026 is more constructive.

“We are increasingly optimistic on Philippine equities, which now trade at exceptionally attractive valuations following a period of economic slowdown, corruption-related concerns, and persistent peso weakness,” it says.

“Much of the negative sentiment has already been priced into the market, creating a more constructive risk-reward backdrop. As a result, any incremental improvement in domestic growth, credible government reforms addressing corruption, or a broader macroeconomic recovery would be received positively by investors,” it adds.

While the aftershocks of last year’s challenges persist, Maybank IBG notes that the combination of governance efforts, benign inflation and easing financial conditions has begun to reshape the investment landscape.

“The government’s efforts to address governance issues and restore credibility in public spending are important first steps towards rebuilding trust,” it highlights.

While the fallout from corruption probes continues to weigh on sentiment, these measures are presented as necessary groundwork rather than a quick fix, it adds.

Favourable macro

Positively, macro conditions provide additional support.

“Inflation has remained benign, supporting household consumption, while a gradually lower interest-rate environment should ease financing pressures and encourage businesses to resume expansion,” Maybank IBG points out, adding that these trends matter for equities because they arrive when valuations already reflect a high degree of pessimism.

It notes that Philippine stocks are trading at deeply discounted levels compared with regional peers. “These improvements come at a time when equity valuations are already deeply discounted, creating opportunities for investors willing to look through short-term noise.”

The Philippine Stock Exchange Index trades at around nine times forecast 2026 earnings, which the brokerage describes as the cheapest level in Asean.

Beyond valuation, fiscal priorities could also shift the growth mix. Maybank IBG flags social spending as an emerging catalyst, stating: “An emerging key potential catalyst for the Philippines would be the bigger focus on social service support from the government in the form of doleouts that could lead to higher consumer spending.”

This emphasis feeds directly into the brokerage’s preference for domestically oriented sectors.

“Despite the challenges of 2025, the Philippines’ underlying domestic consumption story is intact,” Maybank IBG says.

It states that household spending is expected to stay resilient, with private consumption forecast to grow 4.8% in 2026.

That outlook rests on what the brokerage calls long-standing pillars of the economy: overseas Filipino worker remittances and the business process outsourcing industry, both of which continue to support incomes and employment.

Corporate earnings are closely tied to this dynamic.

“The sustained domestic consumption growth is also the main pillar for corporate earnings growth in the Philippines,” it states.

As a result, it adds, sectors linked to everyday spending sit at the core of its investment strategy.

Monetary policy is another near-term driver.

“We expect a further 50 basis points (bps) policy interest rate cut in 2026, on top of the 200 bps of easing since mid-2024,” Maybank IBG says, highlighting benefits for real estate investment trusts, or REITs, and the broader property sector, as lower borrowing costs are expected to improve affordability and help stabilise residential demand.

Fiscal rebalancing reinforces this theme. The shift away from large infrastructure projects towards social subsidies is seen as having a more immediate impact on households.

According to Maybank IBG, the government’s shift in spending emphasis from large-scale infrastructure toward social subsidies is likely to provide a more direct boost to household purchasing power. That, in turn, supports consumer staples and other consumption-linked industries.

Magic 8

Against this backdrop, Maybank IBG outlines its preferred stocks under the banner of its “Magic 8”.

These are International Container Terminal Services, SM Prime Holdings, SM Investments Corporation, Jollibee Foods Corporation, Puregold Price Club, Century Pacific Food, Cebu Air, and BDO Unibank.

The common thread is exposure to mass-market consumption, logistics, tourism, and lending.

Sector-wise, consumer-related names sit at the top of the list.

“We remain ‘positive’ on the consumer sector and maintain it as one of our key ‘overweight’ sectors for 2026,” the research says, citing resilient remittances, continued outsourcing growth, and higher social spending.

Easing raw material costs and a steadier currency are also expected to support margins.

Ports and logistics also feature prominently.

Philippine ports post double-digit growth in 2025, and volumes are expected to remain firm in 2026 as emerging-market trade holds up.

International Container Terminal Services stands out as a beneficiary of these trends, supported by organic throughput growth and overseas expansion.

The outlook for the telecommunications is also better for 2026 after a challenging regulatory period.

Maybank IBG believes clarity around new rules restores focus on the sector’s defensive qualities. It points to the Konektadong Pinoy Act as opening the door to smaller players without fundamentally altering market dynamics.

Property remains another area of focus. The brokerage maintains a “positive” view, driven by developers’ pivot towards retail and office leasing and a more disciplined approach to residential supply.

SM Prime Holdings is highlighted for its mall-heavy portfolio and exposure to middle-income consumers.

Tourism rounds out the growth narrative.

Maybank IBG sees the sector moving from recovery to structural expansion by 2026, underpinned by airport upgrades, pro-tourism policies, and steady economic growth. Cebu Air is identified as a direct beneficiary of rising passenger volumes and improving connectivity.

Banks and utilities are treated more cautiously.

The banking sector is downgraded to “neutral” as net interest margins come under pressure and loan demand softens, although large corporate and consumer lending remain bright spots. Power and utilities also stay at “neutral”, with muted electricity prices limiting earnings visibility.

Currency dynamics form the final piece of the outlook.

Maybank IBG turns more positive on the peso in the first half of 2026, expecting appreciation towards 57.50 against the US dollar.

It notes that “the missing ingredient” in the re-rating for the Philippines’ stock market had been a stronger peso.

And now with that ingredient potentially emerging, the brokerage sees scope for an early-stage market rally, even as structural challenges cap gains later in the year.