Why the PSE Failed in 2025: Engineered Markets and Broken Policy Transmission

 

An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today—Laurence J. Peter 

Wishing you an exciting 2026: record highs, easy money, and all the risks that come with it. 

In this issue: 

Why the PSE Failed in 2025: Engineered Markets and Broken Policy Transmission

I. The Echo Chamber of Optimism

II. Institutional Conflicts of Interest: Agency Problem and the Information Asymmetry

III. Global Euphoria vs. Local Fragility: A Market That Failed to Respond—Despite Every Attempt to Boost It

IV. Engineered Rallies and the BSP’s Easing Cycle Elixir

V. Mounting Concentration Risk and the ICTSI Distortion

VI. Foreign Selling, CMEPA, and the Gaming Bubble

VII. From Equities to Energy: Bailouts Without Calling Them Bailouts

VIII. A Lone Divergence: Mining and the War Economy

IX. The Philippine Treasury Market Confirms the Diagnosis

X. Conclusion: When Policy Loses Its Grip

XI. Epilogue: The Façade of January Effects 

Why the PSE Failed in 2025: Engineered Markets and Broken Policy Transmission 

Why the PSEi 30 underperformed despite rate cuts, engineered rallies, and unprecedented policy support 

I. The Echo Chamber of Optimism

Figure 1

Does the public even remember the barrage of starry-eyed headlines and sanguine projections that dominated discourse from late-2024 through 2025? (Figure 1) 

From Goldman Sachs’ overweight upgrade on Philippine equities (November 2024), to the relentless amplification of projected PSEi 30 returns by the mainstream echo chamber, to a business media outfit hosting a Pollyannish stock market outlook forum in February 2025, optimism was not merely expressed—it was drilled into the public consciousness. 

Strangely, at the forum, Warren Buffett’s aphorism—“be greedy when everybody is fearful”—was cited ironically at a time when virtually every expert was advocating optimism. Even “cautious optimism” emerged as the most defensive stance. 

All told, media and institutional narratives throughout 2025 projected rising equities anchored on a strengthening GDP—an assumption that would soon have the rug pulled out from under it.

Figure 2

In hindsight, the establishment’s posture resembled a classic denial phase in a deflating PSEi 30 bubble cycle. (Figure 2)

II. Institutional Conflicts of Interest: Agency Problem and the Information Asymmetry 

The fundamental problem lies in the structural conflicts of interest between financial institutions and the investing public. 

This dilemma reflects classic agency problem and asymmetric information. The objectives of buy- and sell-side institutions—fees, commissions, deal flow—diverge materially from those of retail investors seeking risk-adjusted returns. 

As a result, sales pitches camouflaged as institutional research or news are designed to attract savings/capital, not to interrogate risk–reward tradeoffs. The information disseminated to the public is therefore shrouded in adverse selection and biased framing. 

Despite serious unintended consequences from excessive interventions—easy money distortions, fiscal crowding-out, regulatory interference, capital controls, bailouts, and capital-market price manipulation—this savings-depleting dynamic receives scant acknowledgment. 

III. Global Euphoria vs. Local Fragility: A Market That Failed to Respond—Despite Every Attempt to Boost It 

There is also little recognition that the Philippine Stock Exchange has vastly underperformed, despite extraordinary efforts to support it.

Figure 3 

As global central banks embarked on a historic easing campaign and global equities posted a third consecutive year of double-digit gains, the PSEi 30 closed 2025 as the second-worst performer in Asia, ahead of only Thailand. (Figure 3, topmost pane) 

Of 19 national bourses tracked by Bloomberg, 16 ended the year higher, averaging a striking 19.22% return—led by South Korea, Pakistan, Sri Lanka, and Vietnam. The Philippines, alongside Bangladesh and Thailand, stood out as an underperforming outlier. (Figure 3, middle graph) 

This flagrant underperformance—despite substantial engineered pumps in Q4—laid bare the market’s internal fragilities. 

IV. Engineered Rallies and the BSP’s Easing Cycle Elixir 

In December, a series of price-distorting late-session “afternoon delight” and pre-closing “rescue pumps” lifted the PSEi 30 by 0.51% MoM. 

These were concentrated in banks and property stocks, echoing the mainstream narrative that rate cuts should disproportionately benefit them. (Figure 3, lowest table) 

Additional support came from ICTSI, following its powerful October–November advance. Although the rally peaked on December 12 before a mild pullback, ICT’s surge drove the services sector up 10.5% and lifted the headline index by 1.67% in Q4.

Figure 4

For context, the BSP’s first rate cut in August 2024 was initially sold as an elixir, propelling the PSEi 30 up by a remarkable 13.4% in Q3 2024. Yet a surprise weak Q3 2024 GDP print (+5.2%) triggered a sharp reversal: –10.23% in Q4 2024 and –5.33% in Q1 2025. After another significant setback in Q3 2025 (–6.46%), the index fell –4.9% in 2H 2025. (Figure 4, topmost window) 

Despite repeated interventions, the PSEi 30 closed 2025 down 7.29%. 

V. Mounting Concentration Risk and the ICTSI Distortion 

Since peaking in 2018, the PSEi 30 has recorded six negative return years out of the last eight—an unmistakable sign of a debt-trapped, late-cycle economy. (Figure 5, middle chart) 

The index’s internals underscore this bearish backdrop: 24 of 30 constituents ended 2025 in the red, averaging a –6.87% decline. (Figure 4, lowest image)

Figure 5

Yet again, ICTSI—the PSE’s largest market-cap stock—nearly single-handedly prevented a deeper collapse. Its 46.9% full-year gain pushed its free-float weight to a record 17.8% in mid-December, ending the year at 16.5%. (Figure 5, topmost diagram) 

Consequently, the combined free-float weight of the top 5 heavyweights to a record 53% but closed at 52.16% still proximate to an all-time high. (Figure 5, second to the highest visual) 

Adjusted for the peso’s 1.6% YoY depreciation to a record low, the PSEi 30 fell 8.78% in USD terms—its seventh year of decline since 2017. (Figure 5, second to the lowest image) 

The dollar index DXY fell by about 9.6% in 2025. 

VI. Foreign Selling, CMEPA, and the Gaming Bubble 

The broader PSE fared no better. Outside a handful of names, most issues declined and market internals remained weak. (Figure 5, lowest chart) 

While synchronized “national team” pumping supported headline levels, it was largely offset by persistent foreign selling—a dominant force since 2018.

Figure 6 

Foreign participation rose to 49.18% of gross volume in 2025, the highest since 2021. (Figure 6, topmost window) 

That said, under globalization and financialization, “foreign selling” does not necessarily imply foreign fund liquidation. Many elite-owned firms operate through offshore vehicles and could be part of the ‘foreign’ trading activities. 

In the meantime, gross and main board volume (MBV) rose 14.64% and 19.13% in 2025, but most of this activity peaked around the CMEPA rollout in July and slowed materially thereafter. Ironically, the capital-consumption effects of the law generated unintended consequences: asset bubbles, negative returns, and corroding liquidity. (Figure 6 middle image) 

For example, as the government cracked down on digital gambling, the PLUS gaming bubble accounted for a staggering 11.65% of main board volume in Q3 2025, revealing how speculative excess merely migrated into the PSE—absorbing retail savings in the process. 

In 2025, concentration activities intensified: the top 10 brokers averaged 63.44% of Q4 main board volume; the top 20 accounted for over 82% both in Q4 and full-year 2025 MBV. 

VII. From Equities to Energy: Bailouts Without Calling Them Bailouts 

Engineered rescue rallies are not cost-free. They amplify concentration risk, intensify late-cycle fragility, and expose deeper balance-sheet stress driven by debt-financed asset support and misallocation. 

This pattern extends beyond equities. 

Authorities initiated a soft bailout of the energy sector—first indirectly via the SMC–AEV–MER asset-transfer triangle, and later through Real Property Taxes (RPT) waivers favoring elite-owned IPPs. This was followed by another buy-in: Prime Infrastructure’s acquisition of a 60% stake in FGEN’s Batangas LNG project, alongside higher consumer charges via GEA-All layered on top of FIT-All. 

VIII. A Lone Divergence: Mining and the War Economy 

For the first time, the mining sector not only outperformed but diverged meaningfully from the PSEi and broader market. Its performance reflects exposure to global commodity dynamics—finance, geopolitics, and the war economy—rather than domestic demand. (Figure 6, lowest graph) 

While retracements are possible given overbought conditions, current signals suggest any correction may be cyclical rather than trend-reversing. 

IX. The Philippine Treasury Market Confirms the Diagnosis 

The warning signs extend to Philippine treasury markets.

Figure 7

By end-2025, the Philippine BVAL curve had clearly steepened relative to the flattish 2023–2024 profile, though it remained less extreme than the pandemic-era 2022 BSP rescue year. This shift points less to growth optimism and more to rising risk premia. (Figure 7, upper diagram) 

While short-dated T-bill yields have not fallen back to 2022 levels—despite policy rate cuts, aggressive RRR reductions exceeding pandemic-era easing, and the doubling of deposit insurance—long-term yields remain materially higher than in 2023–2024, signaling mounting market concern over fiscal conditions, debt supply, and credibility. 

The resulting mixed yield configuration, occurring alongside slowing GDP growth and persistently elevated bank lending rates, reflects not selective liquidity management but a failure of monetary transmission: BSP sought genuine easing, yet impaired bank balance sheets, malinvestment, and fiscal overhang have rendered markets far less malleable than policymakers expected. 

X. Conclusion: When Policy Loses Its Grip 

Taken together, the events of 2025 expose a Philippine financial system increasingly governed by intervention rather than price discovery—and increasingly constrained by balance-sheet fragility rather than cyclical weakness. 

Despite aggressive policy easing activities, engineered equity support, regulatory inducements, and explicit and implicit bailouts, markets failed to respond as expected. Instead, concentration deepened, liquidity thinned, and monetary transmission weakened. 

The underperformance of the PSEi 30 was not an anomaly but a symptom. Equity pumps masked deterioration; index ‘strength’ concealed internal decay. 

The peso weakened, bond yields re-priced fiscal risk, bank lending rates remained elevated, and savings were quietly consumed through speculation and policy distortion. What appeared as support increasingly functioned as stress transfer—from institutions to households, from balance sheets to prices, and from the present to the future. 

In this sense, 2025 was not merely a bad year for Philippine equities. It was a year in which markets signaled—clearly and repeatedly—that policy credibility, strained by diminishing returns and collapsing transmission/tightening effective liquidity, had become the binding constraint. 

Until balance-sheet repair, fiscal discipline, and genuine price discovery are restored, further intervention may sustain appearances—but not balance-sheet health or durable confidence. 

XI. Epilogue: The Façade of January Effects 

January has historically been a strong month for the PSE, often reflecting the so-called ‘January effect’—seasonal inflows driven by year-end cash balance surpluses, portfolio reallocations, and tactical positioning. 

Using the January 2018 peak as the reference point, the PSEi 30 has posted January gains in five of the past eight years (62.5%). Yet over that same post-2018 cycle, full-year returns have been negatives/deficits in six of those years (75%). The implication is clear: early-year strength has repeatedly failed to translate into durable annual performance. (Figure 7, lower chart) 

Even so, institutional cheerleading is likely to intensify. Seasonal rallies will be framed as confirmation of recovery, even as stimulus-driven activity continues to deepen debt-led imbalances and erode household savings. 

This is not to suggest that the PSEi 30 must necessarily close 2026 in negative territory. Rather, when façade substitutes for structure—when form is elevated over substance—market fragility increases. 

Under such conditions, for the general market, the probability of risk and loss continues to outweigh potential gains, regardless of how loudly institutions beat the drum for a bull market. 

Meanwhile, the risk of a meltdown looms. 

____

Select References 

Prudent Investor Newsletters, The Oligarchic Bailout Everyone Missed: How the Energy Fragility Now Threatens the Philippine Peso and the Economy, Substack, December 07, 2025 

Prudent Investor Newsletters, Inside the SMC–Meralco–AEV Energy Deal: Asset Transfers That Mask a Systemic Fragility Loop, Substack, November 23, 2025 

Prudent Investor Newsletters, PSEi 30 Q3 and 9M 2025 Performance: Late-Stage Fragility Beneath the Headline Growth, Substack, November 30, 2025 

Prudent Investor Newsletters, The Philippine Q3 2025 “4.0% GDP Shock” That Wasn’t Substack, November 16, 2025 

Prudent Investor Newsletters, The Philippine Flood Control Scandal: Systemic Failure and Central Bank Complicity, Substack, October 05, 2025 

Prudent Investor Newsletters, June 2025 Deficit: A Countdown to Fiscal Shock, Substack, August 3, 2025 

Prudent Investor Newsletters, The CMEPA Delusion: How Fallacious Arguments Conceal the Risk of Systemic Blowback, Substack, July 27, 2025 

Prudent Investor Newsletters, The Ghost of BW Resources: The Bursting of the Philippine Gaming Stock Bubble Substack, July 6, 2025 

Prudent Investor Newsletters, How Surging Gold Prices Could Impact the Philippine Mining Industry (3rd of 3 Series), Substack, April 02, 2025 

 

 

 

 

 

 

 

Unveiling the Reality Behind the Philippine PSEi 30’s 7,000: Market Concentration, Divergence, Manipulations, and the Overton Window

What's been lost in this frenzied competition for eyeballs and "likes" is the distinction between opinion and journalism. The post-truth cliche is that there is no distinction, that everything is mere opinion and spin, but this is not true: journalism is different from opinion and spin—Charles Hugh Smith 

In this issue

Unveiling the Reality Behind the Philippine PSEi 30’s 7,000: Market Concentration, Divergence, Manipulations, and the Overton Window

I. The PSEi 30 Closes Above 7,000: Is This a "Historic Moment?"

II. Foreign Inflows Targeted at Biggest Market Cap Issues, Historically Chasing Tops

III. PSEi 30 7,000: Primarily an ICTSI Show; Diverging PSEi 30 and Market Breadth

IV. PSEi 30 Rose to 7,000 on Depressed and Concentrated Volume

V. Why Ignore the Impact of the Flagrant Manipulations of the PSEi 30?

VI. The Unannounced "Historic Moments" 

Unveiling the Reality Behind the Philippine PSEi 30’s 7,000: Market Concentration, Divergence, Manipulations, and the Overton Window 

I. The PSEi 30 Closes Above 7,000: Is This a "Historic Moment?" 

Along with the region's sanguine performance, the Philippine PSEi 30 broke past 7,000. Could this signify the start of a bull market, as the media and consensus have suggested?

Figure 1

Businessworld, September 13: The PSEi achieved a significant milestone, closing above 7,000 for the first time in over 19 months. Strong foreign buying and expectations of a US Federal Reserve rate cut contributed to this historic moment. (Figure 1, upper picture) 

Historic. Moment. 

Sure, the PSEi 30 has traded above 7,000 for the last five days and closed above this threshold in the last two. However, how is reaching a 19-month high equivalent to a "historic moment?" 

Media is said to reflect the prevailing mood or express the public’s level of confidence. That’s according to the practitioners of ‘Socionomics.’ 

Could this headline be indicative of the market’s mood? 

Let’s examine public sentiment by analyzing the market internals. 

II. Foreign Inflows Targeted at Biggest Market Cap Issues, Historically Chasing Tops 

Foreign buying was certainly a factor. 

This week, aggregate net foreign inflows amounted to Php 2.7 billion, marking the fifth consecutive week of net buying and the second-largest inflow during this period. (Figure 1, lower diagram) 

However, foreign inflows accounted for only 41.44% of the average weekly turnover, the lowest in five weeks. 

This suggests that local investors have begun to dominate the transactions on the Philippine Stock Exchange (PSE). 

Additionally, the scale of weekly foreign investment was far from record-breaking.

As a side note, in today’s digitally connected, "globalization-financialization" world, foreign inflows could also include funds from offshore subsidiaries or affiliates of local firms.

Figure 2

Sure, expectations of the US Federal Reserve's interest rate cuts have not only fueled a strong rebound in ASEAN currencies but have also energized speculative melt-up dynamics in the region's equity markets, driven by foreign players. 

ASEAN currencies outperformed the global market from July 10 (following the US CPI release) through September 11. (Figure 2, topmost table) 

Yahoo Finance/Bloomberg, September 12: Southeast Asian equities have cemented their position as a favorite play of money managers positioning for the Federal Reserve’s policy pivot. Four of the five best-performing Asian equity benchmarks this month are from the region, with Thailand leading the pack. The buying frenzy has put foreign inflows on track for a fifth consecutive week while the MSCI Asean Index is now trading near its highest level since April 2022. [bold added] (Figure 2, lowest chart) 

Moreover, the yield-chasing phenomenon has spilled over into the worst-performing equities, or the laggards of the region. 

Yahoo Finance/Bloomberg, September 12: After being sidelined by investors for much of this year, some smaller equity markets are suddenly winning favor. The trend is particularly evident in Asia, where Thailand, Singapore and New Zealand rank as the top performers in September. Their benchmarks have risen at least 3% each so far, even as MSCI Inc.’s gauge of global stocks has fallen about 1% following a four-month winning streak. Investor focus seems to be shifting as the world’s biggest equity markets such as the US, Japan and India take a breather, and China’s slump deepens. For many of the smaller Asian markets, a limited exposure to the artificial intelligence theme means their valuations aren’t expensive, making them attractive just as the Federal Reserve’s dovish pivot helps boost their currencies and allows some central banks to embark on rate cuts. [bold added] 

The "core to the periphery" phase indicates that investors have been pursuing yields in less developed and less liquid markets, which are inherently more volatile and considered higher risk. This shift could signify a late-cycle transition. 

So yes, while there may be a semblance of increased confidence due to foreign participation, this dynamic appears to be limited to the most liquid and largest market capitalization issues—those capable of absorbing significant trading volumes.

And that’s exactly the case. Except for last week’s drop to 81%, the percentage share of the 20 most traded issues relative to the main board volume has risen in tandem with the PSEi 30 since mid-June. (Figure 2, lowest image)

That is to say, the PSEi 30’s performance was largely driven by concentrated trading volume in a select group of elite stocks.

Figure 3

Using the BSP’s portfolio flow data, July’s portfolio flows represented the largest since April 2022. (Figure 3, topmost image)

However, the larger point is that foreign money flows tend to chase the peaks of the PSEi 30.

In fact, foreign investments often surged during the culminating (exhaustion) phase of the PSEi 30’s upward momentum, a pattern observed since 2013.

Will this time be different?

It’s important to note that the BSP’s portfolio flows include foreign transactions in the fixed-income markets, but the size of these flows is relatively insignificant.

In a nutshell, the purported confidence brought about by foreign participation has been largely limited to the PSEi 30. 

III. PSEi 30 7,000: Primarily an ICTSI Show; Diverging PSEi 30 and Market Breadth

Does media sentiment resonate with the PSE’s market breadth?

In a word, hardly.

The PSEi 30 rose by 1.25%, marking its second consecutive weekly advance and its ninth increase in 12 weeks since this upside cycle began in the week ending June 28th.

This week’s rebound pushed its year-to-date returns to 8.88%.

While we have seen some substantial returns due to heightened volatility in some of the PSEi 30's underperformers, such as Converge (+10.5%), Aboitiz (+8.4%), and Bloomberry (+8.3%), it was the performance of the two largest market capitalization stocks, SM (+3.47%) and ICT (+2.75%), that drove this week’s free-float gains. (Figure 3, middle pane)

The PSEi 30’s average return was 1.03%. The difference between this figure and the index reflects distortions caused by free-float weighting.

Yet, the increasing volatility in the share prices of several PSEi 30 and non-PSEi 30 firms suggests the formation of miniature bubbles.

With a 17-13 score, decliners outnumbered gainers in the PSEi 30, indicating a divergence between market breadth and the headline index.

Despite reaching the “historic moment” of the PSEi at 7,000, market breadth continues to weaken. (Figure 3 lowest chart)

Declining issues have outpaced advancing issues for the second consecutive week, with the 69-point margin nearly double last week’s 37. Declining issues led the market in all five trading sessions.

Figure 4

Yet, the market capitalization weighting of the top five issues rose from last week’s 51.15% to 51.34%, primarily due to ICT’s increase from 10.83% to 10.99%. (Figure 4, topmost chart)

Or, 5 issues command over half the PSEi 30 price level!

This week’s pumping of the PSEi 30 pushed ICT’s share price to a record high of Php 418.6 on Thursday, September 12th. (Figure 4, middle graphs)

To put it another way, ICTSI has shouldered most of the burden in pushing the PSEi 30 to 7,000.

Additionally, ICTSI's rise has been supported by rotational bids of the largest banks, SM, SMPH, and ALI (the six largest), which is publicly shaped by media and the establishment narratives through the promotion of BSP and US FED easing as beneficial to stocks and the economy.

The public has been largely unaware of the buildup of risks associated with pumping the PSEi 30, driven by a significant concentration in trading activities and market internals

The market breadth exhibits that since only a few or a select number of issues have benefited from this liquidity-driven shindig, the invested public has likely been confused by the dismal returns of their portfolios and the cheerleading of media and the establishment.

IV. PSEi 30 Rose to 7,000 on Depressed and Concentrated Volume 

Does the market’s volume corroborate the media’s exaltation of the PSEi reaching 7,000?

Succinctly, no.

To be sure, main board volume surged by 22%, increasing from an average of Php 4.9 billion to this week’s Php 5.9 billion. (Figure 4, lowest image)

However, main board volume remains substantially lower than the levels observed when the PSEi 30 previously reached the 7,000-mark.

Figure 5

Moreover, despite a 4.2% monthly surge in August that pushed year-to-date returns (January to August) to 6.94%, the eight-month gross volume fell to its lowest level since at least 2012. (Figure 5, topmost visual)

That’s in addition to the disproportionate share weight of over 80% carried by the top 20 issues on the main board volume, as noted above.

Incredible, right?

But there’s more. 

The main board volume consists of:

-Client-order transactions

-Dealer trades (usually day trades)

-Cross-trades (trades from clients in the same broker)

-Done-through (intrabroker/broker subcontract) trades 

Last week, the top 10 brokers controlled 53.84% of the main board volume, averaging 56.75% since the end of June.

Or, concentration in trading activities has also been reflected in the concentration of broker trades.

The point is, what you see isn’t always what you get.

Main board (and gross) volume doesn’t necessarily reflect broader public participation.

The sharp decline in direct participation by the public in 2023 underscores this reality. The PSE’s active accounts comprised only 17.6% of the 1.9 million total accounts in 2023—the lowest ever. (Figure 5, middle image)

Instead, trades within the financial industry have played a significant role in the PSE’s overall turnover.

For instance, in Q1 2024, the BSP noted that claims of Other Financial Corporation (OFC) on the other sectors "grew as its investments in equity shares issued by other nonfinancial corporations," and also “claims on the depository corporations rose amid the increase in its deposits with the banks and holdings of bank-issued equity shares”

Have OFCs been a part of the national team? OFCs include bank subsidiaries, public and private insurance and pension firms, investment houses, et.al. (BSP, 2014)

Why would the PSE’s volume endure a sustained decline if there has been significant savings to support the alleged increase in public confidence?

Historic? Hyperbole. 

V. Why Ignore the Impact of the Flagrant Manipulations of the PSEi 30? 

Finally, why would everyone discount, dismiss, or ignore the brazen "pumps-and-dumps" and "pre-closing price level fixing" at the PSE?

In the last five days, managing the index level involved early ICTSI-fueled pumps, aided by frenetic rotational bids on the other top five to six market caps. (Figure 5, lowest images)

After surpassing 7,000-level intraday, the local version of the "national team" dumped their holdings—using the 5-minute pre-closing float—onto unwitting foreign and retail buyers.

Despite this, the PSEi 30 managed to close above the 7,000 level during the last two days—albeit on low volume, with negative market breadth and concentrated trading activities.

Still, does everyone believe that the mounting distortions in the prices of (titles to) capital goods will come without consequences for the financial markets and the real economy?

What happened to the army of analysts and economists? Has the fundamental law of economics escaped them?

Or does the management of the PSEi 30 levels represent part of the establishment’s manipulation of the Overton Window?

Sure, the mainstream media has been so desperate to see a "bull market" that they describe a 19-month high as a "historic moment."

However, much of today’s media reporting seems to be more than mere cheerleading: genuine journalism has been sacrificed in favor of copywriting for vested interests paraded as news. 

VI. The Unannounced "Historic Moments" 

But the so-called "Historic Moment" has manifested in many unpopular and unannounced forms.

Let us enumerate the most critical ones: 

First, systemic leverage, consisting of PUBLIC DEBT plus TOTAL bank lending, has reached Php 28.515 trillion as of July 2024, accounting for 113% of the estimated 2024 NGDP!  Public debt servicing has also reached unparalleled levels!

Second, Q2 public spending, the financial industry’s net claims on the central government (NCoCG), and the banking system’s held-to-maturity (HTM) assets have also reached all-time highs.

Third, the banking sector’s business model transformation—from production loans to consumer loans—has been unprecedented.

Fourth, the savings-investment gap has reached a significant milestone.

Fifth, PSE borrowings, led by San Miguel’s Php 1.484 trillion, have also reached historic highs.

Sixth, the money supply (M1, M2, and M3) relative to GDP remains close to its record highs in Q1 2021.

Figure 6

Seventh, the BSP’s asset base remains near the record high attained during the pandemic bailout period (as of June 2024.) (Figure 6 topmost chart)

While there are more factors to consider, have you heard any media or establishment mentions or analyses of these issues?

Don’t these factors have an impact on the "fundamentals" of the PSE or the economy?

Or are we expected to operate under a state of "blissful oblivion," or the blind belief that "this time is different?" (The four most-deadliest words in investing—John Templeton)

It not only fundamentals, the current phase of the market cycle also tells a different story than the consensus whose primary focus is on a "return to normal" phase. (Figure 6 middle and lowest graphs)

Good luck to those who believe that the PSEi 30’s 7,000 level signifies a bull market or a historic moment.

____

References

The OFCs sub-sector includes the private and public insurance companies, other financial institutions that are either affiliates or subsidiaries of the banks that are supervised by the BSP (i.e., investment houses, financing companies, credit card companies, securities dealer/broker and trust institutions), pawnshops, government financial institutions and the rest of private other financial institutions (not regulated by the BSP) that are supervised by the Securities and Exchange Commission (SEC).

Jean Christine A. Armas, Other Financial Corporations Survey (OFCS): Framework, Policy Implications and Preliminary Groundwork, BSP Economic Newsletter, July-August 2014, bsp.gov.ph

 

The PSEi 30 6,500 Enigma: A Closer Look at the Widening Gap Between PSEi 30 and Market Internals

 The house of delusions is cheap to build but drafty to live in, and ready at any instant to fall—A. E. Housman

The PSEi 30 6,500 Enigma:  A Closer Look at the Widening Gap Between PSEi 30 and Market Internals

Along with the rise in global risk appetite, the Philippine PSEi reached 6,500 but its market internals told a different tale. 

The prospect of easy money has whetted the speculative appetite of the global financial markets.

With the US dollar index down by 0.92% this week, it spurred a rally in the currencies and stock markets of the Asia-Pacific region.

Figure 1

Five of the nine ex-Japan Asian currencies rose, led by the Thai baht (THB), Indonesian rupiah (IDR), and the Singapore dollar (SGD). The Philippine peso  (PHP) increased by 0.14%. The heightened speculative fervor was apparent in the region's stock markets. (Figure 1, upper window)

Seventeen of the 19 national bourses in the Asia-Pacific region jumped by an average of 1.43%. China's SSEC and Sri Lanka's Colombo were the only laggards. (Figure 1, lower chart)

Meanwhile, five of the national bourses set fresh all-time highs for the week: Japan, India, Taiwan, Mongolia, and Pakistan.

Simultaneously, the Philippine PSEi 30 marked a second straight weekly gain. 

However, there is an idiosyncratic story behind the PSEi 30’s surge.

Figure 2

This week's advance brought the PSEi 30 back into positive territory year-to-date (+0.66%). 

But gainers were in the minority, with 14 of the 30 members closing higher. Four of the five biggest market cap issues were the focal point of this week's advance. (Figure 2, topmost pane)

Ironically, the average weekly return was only 0.12%, indicating that on an equal-weighted basis, the overall performance was subdued due to balanced upside and downside returns from its members. 

Market breadth in the PSE was slightly negative, with decliners leading advancers for the second consecutive week. (Figure 2, second to the highest image)

Though mainboard volume fell by 23.1% to Php 3.69 billion, the top 10 brokers still controlled a significant majority, averaging 57% of it. (Figure 2, second to the lowest diagram) 

Further, the top 20 traded issues represented 86.1% of the mainboard transactions. (Figure 2, lowest chart) 

All this illustrates the skewed nature of trading activities where institutional players have been propping up the headline index. 

Figure 3

This week’s pump led by ICTSI (+2.92%) has elevated its free float market cap to its highest level. (Figure 3, topmost chart) 

Pumps in BDO (+8.3%) and SM (+2.35%) have also boosted the top 5's free float cap to 50.5%.  BDO ranked third after SM and ICT in terms of free float market cap. 

The share of the top 5’s free float market cap jumped to 50.5%. 

Incidentally, end-session pumps and dumps were comparatively insignificant compared to previous weeks.

Figure 4

In any case, however one slice or dice it, the slack in volume remains the principal factor behind the nearly decade-long drought in returns.

June's gross volume reached a low not seen since 2010, while the first semester's gross volume plummeted to 2011 levels. (Figure 4, topmost and middle charts) 

It is no coincidence that the declining PSE volume has coincided with the banking system's liquidity metric: cash-to-deposit ratio. (Figure 4, lowest graph)

Despite all the constant yelling by the mainstream of statistical hypes, which have been labeled as G-R-O-W-T-H, the PSEi 30 remains one of the region's laggards, which are likely symptoms of capital and savings consumption.

And notwithstanding the perpetual cheerleading, the echo chamber has still been silent about the mounting risks from debt, leveraging, inflation, and various forms of misallocations and malinvestments. They’ve been reticent about the mounting risks of war too! 

Aside from the distortion from the BSP's policies, institutional pumping remains a significant factor behind this bear market. 

Or, the result of such organized pumps is to magnify pricing imbalance by inflating their share prices relative to their natural income streams and distorting capital prices, resulting in the amplification of the misallocation of resources in the real economy.

Figure 5

In the end, besides political objectives (e.g. rising stocks = resilient economy = good governance), another reason could be to prevent the PSEi 30 from sliding into a death cross, potentially prompting further and deeper scale of foreign selling (as in the past). Figure 5

It's worth noting that despite the obvious shift to a wartime economy, which comes at the expense of the market economy, authorities and the mainstream prefers the general public to remain complacent, assuming that everything will remain hunky dory or stable. 

In doing so, authorities can continue accessing public savings to fund their militant political projects (boondoggle) and exercise centralized control over the economy, with institutional cronies acting as their facilitators.  

Bubbles eventually burst.