Behind the Retail Surge: Dissecting the PSE’s 2024 Investor Profile Amid Heightened Volatility and Economic Strain

  

The world has never been so awash in speculative finance, ensuring aberrant market behavior. Never has the global leveraged speculating community been as colossal and powerful. Egregious Treasury “basis trade” leveraging drives unprecedented overall hedge fund leverage. Household (loving dip buying) market participation is unparalleled, with the proliferation of online accounts, options trading, and herd-like speculation creating extraordinary market-moving power—Doug Noland 

In this issue

Behind the Retail Surge: Dissecting the PSE’s 2024 Investor Profile Amid Heightened Volatility and Economic Strain

I. Introduction: A Record-Breaking Year for Retail Accounts

II. The Retail Activity Paradox; The Real Drivers Behind the Surge: A PSEi 30 Bull Market?

III. Institutional Dominance, Trading Concentration and Market Manipulation

IV. Concentration Risks: National Team, Other Financial Corporations and Total Financial Resources

V. 2024’s Economic Operating Conditions, Financial Distress and Unintended Consequences

VI. The Savings Illusion and the Generational Shifts: Herding Among Youth, Decline Among Seniors

VII. The Digital Divide in Brokerage: Traditional Brokers Under Pressure

VIII. Conclusion: A Mirage of Growth 

Behind the Retail Surge: Dissecting the PSE’s 2024 Investor Profile Amid Heightened Volatility and Economic Strain 

What’s really driving the surge in Philippine retail investors? A closer look reveals economic desperation, distortion, and deepening divides beneath the surface of stock market optimism 

I. Introduction: A Record-Breaking Year for Retail Accounts 

The PSE reported on June 9, 2025: "The number of stock market accounts in the Philippine Stock Exchange reached 2.86 million in 2024, up by 50.1 percent from 1.91 million in 2023. This was fueled by a 62.0 percent surge in online accounts to 2.47 million from 1.53 million. “This 50 percent jump in number of accounts is the highest we have recorded since we started tracking the investor count and profile in 2008. This substantial growth was made possible by the enabling of digital platforms to connect to PSE”s trading engine, thereby facilitating the trading by investors in the market. PSE is committed to being true to its advocacy of promoting financial inclusion,” said PSE President and CEO Ramon S. Monzon. “More than the numbers, what is important is that retail investors are equipped with investment know-how to avoid investing pitfalls. We address this need for investor education through our various investing literacy initiatives. We also actively work with trading participants and government and private entities to spread the word about personal finance and stock market investing,” Mr. Monzon added." (bold added)

Figure 1

The PSE seems exhilarated by this unprecedented surge. Yet beneath the celebratory tone lies a paradox: they appear unsure why this spike occurred. Their attribution to the "enabling of digital platforms" seems insufficient, especially since such infrastructure has been in place since 2013. (Figure 1, topmost graph) 

This inability to explain the surge becomes more apparent when considering their bewilderment over the depressed number of active accounts. 

As the PSE acknowledged: "While growth in retail accounts has been remarkable, the real challenge is getting retail investors to participate more actively in our market as they only contribute 16 percent to total value turnover. We are optimistic that the upcoming reduction in stock transaction tax (STT) to 0.1 percent from 0.6 percent, along with the various investor education programs and upcoming pipeline of products of the Exchange, will encourage greater investor activity for the remainder of 2025," Mr. Monzon noted. (bold added) 

The low contribution of retail investors to market turnover—underscores the PSE’s challenge: Understanding the essence and the development of the capital markets in line with economic freedom, rather than using it as a covert political redistribution, which drives malinvestments and inequality.

II. The Retail Activity Paradox; The Real Drivers Behind the Surge: A PSEi 30 Bull Market?

Three critical questions emerge from this phenomenon: 

One, is the PSE experiencing a bull market, fueling frenzied retail participation? 

Two, could the torrent of enrollment reflect symptoms of economic desperation—people seeking to plug income gaps amid stagnant living standards?  Or, is this a case of instant gratification through asset speculation? 

Three, has a sudden boom in savings driven retail investors into stocks? 

"Is the PSE experiencing a bull market driving frenzied retail participation?" 

With the PSEi 30 returning just 1.22% in 2024, the surge in new participants seems disconnected from its performance. (Figure 1, middle window) 

However, breaking down this performance by quarters reveals important insights. 

While Q1 2024's 7.03% increase may have been a contributing factor, Q3's phenomenal 13.4% returns likely lured the bulk of these newcomers into stocks. (Figure 1, lowest chart) 

Of course, they were also likely swayed by the constant "propagandizing" or the bombardment by media and establishment "talking heads" of a "return of a bull market!" 

Even more, one critical aspect highlighted by the PSE deserves attention: retail investors "contribute 16 percent to total value turnover." This means retail trades represent a significant minority in the PSE’s turnover.

Figure 2

According to PSE infographics, retail active accounts represented 23.1% of total accounts and 24.5% of online accounts, totaling 660,714 retail accounts. The massive influx of new participants helped boost the active account ratio from an all-time low of 17.5% in 2023 to 23.1% in 2024. (Figure 2, topmost and middle images) 

Our underlying assumption is that the data reflects the ratio of active to total accounts, rather than the proportion of active accounts relative to total market turnover. 

As further proof of the PSE's lackadaisical activities, gross volume turnover rose by just 1.37% in 2024—the second lowest peso level since at least 2014. (Figure 2, lowest diagram) 

III. Institutional Dominance, Trading Concentration and Market Manipulation

Figure 3 

This raises a striking question about the remaining 84% share of total turnover. The answer lies with institutional investors—both local and foreign. Foreign money accounted for 48.8% of gross turnover, with foreigners selling local equities worth Php 25.253 billion in 2024. (Figure 3, topmost chart) 

Foreign investors represented 36% of active online activities, though the distribution between retail and institutional foreign activities remains unspecified. 

The data reveals a staggering concentration of trading activities in 2024:

• The top 10 brokers accounted for a daily average of 58.9% of mainboard turnover. (Figure 3, middle window)
• The top 10 and 20 most actively traded issues averaged 64% and 83% respectively, and
• The Sy Group (among the top 3 of the five biggest market capitalizations) averaged 21.19% of market activity.

The scale of concentrated activities also elucidates evidence of "coordinated price actions," such as the post-lunch recess "afternoon delight" and the 5-minute pre-closing "float pumps-and-dumps"—as demonstrated by some of the major activities in 2025. (Figure 3, lowest charts) 

Basically, the PSEi 30 has been "propped up" or "cushioned" by local institutional investors.

Figure 4

As a result, the share of the top five free-float heavyweights reached its highest level at 52% in December and averaged 50.3% in 2024—meaning their free-float share accounted for more than half of the index. SM, ICT, BDO, BPI, and SMPH delivered returns of 3.01%, 56.04%, 10.34%, 17.54%, and -23.6%, respectively, resulting in an average return of 12.76% in 2024—a clear sign of divergence from the rest of the PSEi 30. (Figure 4, upper pane) 

Furthermore, given that the aggregate advance-decline spread was generally negative, albeit better than in 2023, this shows why novice "traders" morphed into "investors." Or, the negative spread signifies that losses dominated the overall performance of listed firms at the PSE—a continuing trend since 2013. (Figure 4, lower visual) 

With the PSEi returning 1.22% in 2024, the asymmetric performance reinforces the massive divergence between the PSEi 30 and the broader PSE universe. 

Put simply, the synchronized and mostly coordinated pumps and dumps of the top five—or even the top ten—have fundamentally kept the PSEi 30 from a free fall. 

IV. Concentration Risks: National Team, Other Financial Corporations and Total Financial Resources

Figure 5

It is no coincidence that the ebbs and flows of the domestic private sector claims of Other Financial Corporations (OFCs) have dovetailed with the PSEi 30 level. (Figure 5, upper graph) 

In short, OFCs appear to have played a very substantial role in propping up the PSEi 30. 

Could they be part of the local version of the "national team" aimed at supporting price levels of the PSEi 30? 

It is also not a coincidence that banks have been deepening their hold on the nation’s total financial resources (assets), a trend that further reveals the depth of systemic concentration risks. 

Although the growth of Total Financial Resources has been slowing from its July 2024 peak of 11.23% to 5.06% in April 2025, the share of Philippine banks and universal banks in the total has been drifting at all-time highs of 82.64% and 77.08%, respectively. (Figure 5, middle diagram) 

Could all these actions have been designed to keep asset prices or "collateral values" afloat to stave off risks of credit deflation, which would imperil the banking system? 

V. 2024’s Economic Operating Conditions, Financial Distress and Unintended Consequences 

"Could the torrent of enrollment reflect symptoms of economic desperation?" 

Let us also not forget the operating conditions in 2024. The BSP initiated its easing cycle in the second half of 2024 (rate cuts and RRR cut), while public spending rose to a record high. 

The unintended consequences of the PSEi 30's 'Potemkin village' effect extend beyond price distortions—overvaluing capital goods and fostering spillover effects through excess capacity and malinvestments. More importantly, it redistributes wealth through zero-sum transactions, where institutions sell holdings at elevated prices while naive retail participants are 'left holding the bag.' 

Once again, downside volatility has 'emasculated' these neophytes, transforming their initial short-term trading positions into long-term or 'buy-and-hold investments.' More precisely, their failed attempts to generate short-term income resulted in a 'trading freeze.' 

That is to say, many novice traders were drawn in by the pursuit of short-term yield—whether to compensate for insufficient income, recover lost purchasing power, or escape excessive debt—by engaging in stocks, a true 'Hail Mary Pass!' 

It is no surprise that this period aligned with milestone highs in sentiment-driven surveys on self-rated poverty and hunger incidences. 

In essence, many newcomers likely perceived the PSE not as a structured investment market but as a high-stakes gamble—a 'lottery ticket' or a 'casino' offering a chance to escape financial hardship. 

VI. The Savings Illusion and the Generational Shifts: Herding Among Youth, Decline Among Seniors

"Has a sudden boom in savings driven retail investors into stocks?" 

Using the Philippine banking system's deposit liabilities and cash balances as proxies, the answer is definitively no. In 2024, despite record-high bank credit expansion, bank deposit liabilities reported their lowest growth rate of 7.04% since 2012, while PSE volume increased by only 1.4%. (Figure 5, lowest chart)

Figure 6

Next, bank cash and due balances fell to their lowest level since 2018, wiping out the historic liquidity injections by the BSP during the pandemic recession in 2020. (Figure 6, topmost pane) 

Circling back to retail accounts, distributed by generations, the accounts with the biggest gains emerged from Gen Y and Gen Z, posting 48.8% and 26.5% growth in 2024, respectively. (Figure 6, middle image) 

This category hints that with likely insufficient income, these age groups could have fallen prey to the ‘herding effects’ of the PSEi 30's Q1 and Q3 upside volatility. 

In contrast, seniors' growth fell sharply from 14.8% in 2023 to 7.3% in 2024. Seniors, likely with the most savings, topped in 2023, but they accounted for the least growth (3.7%) in online accounts in 2024. 

VII. The Digital Divide in Brokerage: Traditional Brokers Under Pressure 

The surge in online accounts, representing 86.42% of total accounts, has reduced traditional brick-and-mortar accounts to just 13.58%. However, non-online brokers still represent the vast majority of trading participants. 

According to PSE's 2024 infographics, there were 121 active trading participants, but only 37 offered online accounts—meaning 30% of brokers accounted for the bulk of total turnover. (Figure 6, lowest graph) 

This implies that brick-and-mortar brokers are fighting for a rapidly dwindling share of PSE volume, making many vulnerable to sustained low-volume conditions and an extension of the prevailing bear market. 

VIII. Conclusion: A Mirage of Growth 

The Philippine Stock Exchange's reported surge in new accounts in 2024, while seemingly a triumph of financial inclusion and capital market deepening, masks a more complex and potentially troubling reality. 

Our analysis suggests that this growth isn't primarily a result of a robust bull market or a sudden boom in savings. Instead, it reflects heightened volatility, a concentrated market, and a populace grappling with economic hardship. 

The significant disconnect between the dramatic increase in accounts and the persistently low level of active participation—coupled with the overwhelming dominance of institutional investors—paints a picture of a market, where retail investors, particularly younger generations, may be making a "Hail Mary Pass" amid limited economic opportunities. 

The “Potemkin village” nature of the PSEi 30’s performance—propped up by institutional activities and circumstantial signs of coordinated activity—raises deeper concerns: price distortions, misallocated capital, and the quiet transfer of wealth from uninformed and gullible retail players to more sophisticated institutions. 

Moving forward, it’s no longer enough for the PSE to simply lower transaction taxes, launch new products, or expand investor education programs. 

What’s truly needed is a political economy that fosters real economic freedom—grounded in long-term thinking or lower time preference—so savers can build genuine wealth by channeling their capital into productive enterprise and transparent capital markets. 

Above all, capital markets must operate with integrity: free from manipulation, insulated from rigged dynamics, and designed to protect—not exploit—retail investors from becoming cannon fodder in a system tilted toward institutional dominance. 

___

References 

Doug Noland, Uncertainty Squared, June 7, 2025, Credit Bubble Bulletin 

Philippine Stock Exchange, Stock market accounts breach 2M mark, June 9, 2025 pse.com.ph

 

Trump's Inauguration: Declares War on Interest Rates; Philippine Peso Rallies, Treasury Yields Steepen, While PSEi 30 Lags Behind Asian Peers

 

Speculation is a name given to a failed investment and… investment is the name given to a successful speculation–-Edward Chancellor 

Trump's Inauguration: Declares War on Interest Rates; Philippine Peso Rallies, Treasury Yields Steepen, While PSEi 30 Lags Behind Asian Peers

In this issue

I. Year of the Snake: Trump’s Baptism of Fire:  Declares War on Interest Rates 

II. Asian Markets Embraces Trump’s Inaugural Risk-On Rally: Stronger Currencies, Falling Bond Yields, and Equity Gains 

III. Philippine Peso Rallies as the Philippine Raises in $3.29 Billion in Bonds, Yield Curve Steepens 

IV. The PSEi 30 Misses out on the Electrifying Surge in Global Risk-Taking Appetite; the January Effect and More on the Chinese Zodiac Cycle 

V. Will This Week's Q4 GDP Announcement Alter the PSEi 30's Pervasive Negative Sentiment? 

VI. PSE Activities: Financial Casino for the Big Boys 

VII. Foreign Selling Drives PSEi 30 Decline, Low Savings Contribute to Thin Market Volume and the Sunk Cost Fallacy 

Trump's Inauguration: Declares War on Interest Rates; Philippine Peso Rallies, Treasury Yields Steepen, While PSEi 30 Lags Behind Asian Peers

Trump 2.0 opens with a declaration of war against interest rates. Global and Asian markets cheer. The Philippine peso rallies, the Treasury yield curve steepens, while the PSEi 30 trails behind its Asian peers.

I. Year of the Snake: Trump’s Baptism of Fire:  Declares War on Interest Rates

Donald Trump kicks off his presidency with a bang. 

He fired his opening salvo against the U.S. Federal Reserve, demanding they slash interest rates and threatening to raise tariffs on OPEC members if they fail to lower oil prices. 

In a video message to the World Economic Forum (WEF) in Davos, Switzerland, he stated(via Reuters): "I'll demand that interest rates drop immediately. And likewise, they should be dropping all over the world. I’m also going to ask Saudi Arabia and OPEC to bring down the cost of oil." (bold and italics mine) 

He also softened his stance on China, refraining from arbitrarily imposing tariffs.

Bloomberg/Yahoo Finance reported: "We have one very big power over China, and that’s tariffs, and they don’t want them," the U.S. leader told Fox News host Sean Hannity in an interview that aired Thursday in the U.S. "And I’d rather not have to use it. But it’s a tremendous power over China." (italics mine)

Either Trump’s advisors suggested that slashing interest rates could slow inflation, or, as we noted two days before the U.S. election, tariffs were seen as an instrument or tool for his trade policies, much like in Trump 1.0. 

Perhaps also, in recognition that ongoing wars contribute to supply disruptions and thus influence interest rates, President Trump suspended foreign aid for 90 days.

This move could apply pressure on both Ukraine and Israel in their pursuit of continued warfare or military objectives. The U.S. government has provided billions in financing and material support to sustain the conflicts in Ukraine (at least USD 69.5 billion according to the U.S. State Department) and Israel (USD 12.5 billion as reported by the Council on Foreign Relations).

If we are not mistaken, most of the critical actions taken during his first week were interconnected and could have been designed to curb inflation and lower interest rates. 

However, Trump has been notably reticent about addressing the snowballing deficit spending, which is currently at an all-time high. 

With the possibility of easy money in the air, U.S. and global markets celebrated Trump’s inauguration. The major U.S. equity benchmark, the S&P 500, hit a record high, while Bitcoin neared its all-time high, and the crypto market entered a hyper-volatile phase. The US oil benchmark, WTIC, fell 3.5% over the week. 

According to the Wall Street Journal, "The crypto industry eagerly awaited Donald Trump’s return to the White House. Now, it’s reeling after the president and first lady launched a pair of meme coins. Dubbed $TRUMP and $MELANIA, the tokens serve no economic purpose—their value is largely driven by internet meme popularity. Since their launch Friday night, the market cap of the president’s coin has surged to $8.4 billion, while the first lady’s token is valued at approximately $800 million, according to CoinMarketCap." (italics mine) 

Trump's ascension has ignited hyper-volatility in the crypto sphere, epitomizing the intensification of resource misallocation, symptomatic of an entrenched and deepening global speculative mania. 

Is this a sign of its terminal phase? 

Similarly, as stated last week, Trump’s administration, which begins in the Year of the Snake, "promises to be a period of intense geopolitical activity, where traditional alliances might be tested, and new power dynamics could emerge, all under the ambitious and often unpredictable deal-making leadership." 

Trump’s first week in office marked a baptism by fire for geopolitics, the global economy, and financial markets. 

Of course, one week doesn’t make a trend.

II. Asian Markets Embraces Trump’s Inaugural Risk-On Rally: Stronger Currencies, Falling Bond Yields, and Equity Gains 

How has all this affected Asia?

Figure 1

First, the U.S. Dollar Index $DXY fell by 1.8%, marking its largest weekly drop since November 2023, primarily due to a 2.2% gain in the euro $EURUSD.

The DXY, an index measuring the U.S. dollar's value against a basket of foreign currencies, fell from a two-year high. This drop might reflect overbought conditions or could be a relief countertrend activity spurred by Trump's actions. 

Despite this, the sinking dollar lifted all Asian currencies quoted by Bloomberg. The U.S. dollar weakened most against the Malaysian ringgit $USDMYR, Thai baht $USDTHB, and South Korean won $USDKRW. (Figure 1)

Figure 2

Next, the U.S. Treasury market hardly reacted to the dollar’s steep decline, with yields on 10-year notes falling only marginally. 

However, yields on most ASEAN treasuries dropped significantly, or ASEAN bond prices rallied strongly. The Philippines, in particular, mirrored its U.S. Treasury counterpart $TNX. (Figure 2)

Figure 3

Lastly, with the prospect of easy money, 13 of the 19 national indices in Asia closed the week higher, averaging a 0.73% return in local currency terms. Sri Lanka’s Colombo and Mongolia’s MSE both hit their respective all-time highs. Sri Lanka, Japan's Nikkei 225, and Hong Kong's Hang Seng Index were among the top performers for the week. (Figure 3, upper window) 

Rallies in Japan and Hong Kong benchmarks reached the resistance levels of their respective trading ranges. (Figure 3, lower chart) 

III. Philippine Peso Rallies as the Philippine Raises in $3.29 Billion in Bonds, Yield Curve Steepens

And what of the Philippines? 

Figure 4

Despite a strong rally among its regional peers, the USD-PHP exchange rate slipped by 0.56% week-over-week, largely due to a 0.7% rally on Friday. (Figure 4, topmost image) 

This comes amidst the National Government's successful $3.29 billion bond sale, which included U.S. dollar and euro-denominated bonds, some of which were sustainability-focused offerings. The funds raised are intended to help finance the government’s budget, according to Reuters and Interaksyon. 

Muted gains, despite significant U.S. dollar and euro inflows for Q1 2024? There could be more borrowings in the coming two months. 

For example, the Bangko Sentral ng Pilipinas (BSP) reported $3.21 billion in approved foreign borrowings for Q4 2024: "For the period from October to December 2024, the Monetary Board approved six (6) public sector medium- to long-term foreign borrowings, amounting to $3.21 billion. This is 3.35% (or $0.11 billion) lower than the $3.32 billion in foreign borrowings approved for the same period last year." (italics added) 

Approved loans have been on an upward trend since at least Q4 2022, with a notable spike in Q1 2023, followed by a dip in Q2 before continuing to trend higher. (Figure 4, middle diagram) 

These approved loans are part of the BSP’s external borrowings, meaning higher debt loads will result in higher debt-servicing costs, which include both principal repayment and interest expenses—exacerbating the Philippines’ US dollar "short" conditions. (Figure 4, lowest graph) 

Furthermore, National Government borrowings deposited with the BSP should contribute to the Gross International Reserves (GIR), though this represents "borrowed reserves" that require debt servicing. 

The focus on maintaining benchmarks to project an image of sound macroeconomics is, in reality, more of a façade.

Figure 5

Secondly, not only have Philippine treasury rates been climbing from the belly to the long end of the yield curve, but they have also been transitioning into a bearish 'steepener,' with short rates reflecting the BSP's insistence on continuing its easing cycle, which raises inflation risks. 

Unknown to the public, this may be linked to the administration’s proposed "food security emergency," which was initially scheduled for implementation on January 22nd but has since been delayed "due to non-transmittal of documents," or legal technicalities. 

Like Trump, local authorities aim to curb inflation through a combination of quasi-price controls and by injecting government reserves into the marketplace under the guise of a "food security emergency". 

However, this approach fails to address the demand component, which is evidenced by record-high bank lending, unprecedented levels of public sector spending resulting in all-time high public debt, and historically high nominal liquidity conditions. 

Moreover, it misunderstands the dynamic nature of human actions, where suppressing activity in one area can lead to complex, unpredictable "multiplier" feedback loops (or second to nth-order effects) that ultimately undermine the original intent or objective. 

The effort to suppress interest rates through the "food security emergency" reflects the administration’s entrenched belief in "free lunch" politics, which the markets have resisted. 

IV. The PSEi 30 Misses out on the Electrifying Surge in Global Risk-Taking Appetite; the January Effect and More on the Chinese Zodiac Cycle

The Philippine equity benchmark, the PSEi 30, missed out on the adrenalin-powered risk-taking appetite following Trump’s inauguration and his push for a return to a global free-money regime.

Among Asia’s 19 national indices, it was one of the six equity laggards—an outlier. 

The PSEi 30 fell by 0.88%, marking its third weekly drop and pulling down its year-to-date performance to -3.56% with only a week left in January. 

The "January effect" has traditionally dominated the PSEi 30’s first-month performance, with only three declines in the last 12 years (since 2013). (Figure 5, middle pane) 

While a strong January doesn't necessarily guarantee positive annual returns, historical data shows that after three negative Januarys—2016, 2020, and 2021—the market experienced negative annual returns. Therefore, if this pattern and correlation holds, a deficit in the PSEi’s performance this January could signal that the negative trend may persist through the year. 

Moreover, January's positive returns have been slowing over time. 

Still, when viewed from the perspective of the Chinese Zodiac cycle, which follows the lunar-solar calendar rather than the contemporary Gregorian calendar, the Chinese New Year typically falls between January 21 and February 20. 

Therefore, in this context, examining PSEi 30 returns for the Year of the Snake from February to February reveals heightened volatility with a downside bias emerges: +16.7% in 1989, -12.85% in 2001, and -4.4% in 2013. 

V. Will This Week's Q4 GDP Announcement Alter the PSEi 30's Pervasive Negative Sentiment? 

The Philippine Statistics Authority (PSA) is scheduled to announce the Q4 and annual GDP figures on January 30.

In any case, the PSEi 30's weakness have emerged even before the GDP announcement. 

Historically, the week prior to the GDP release has typically resulted in positive returns, with twelve out of twenty pre-GDP weeks since 2020 showing gains. (Figure 5, lowest chart) 

On average, this has resulted in a 0.67% gain up to last week. 

That said, the PSEi 30 has suffered four consecutive negative performances in the past four pre-GDP weeks, which has weighed on its average returns amid a backdrop of slowing GDP growth.

VI. PSE Activities: Financial Casino for the Big Boys 

While the public often views the PSEi 30 as a barometer of the "market," it is important to recognize that only a few stocks drive its performance.

Figure 6

Despite the index’s recent losing streak, the top five market heavyweights still accounted for 51.7% of the index as of January 24, while the top 10 had a combined 74.1% free-float-adjusted weight. (Figure 6, upper image) 

This degree of concentration does not operate in isolation; the top 10 brokers accounted for 57.7% of this week’s trades, primarily driven by institutional brokers. 

The top 10 and 20 most traded issues made up 65.9% and 82.2% of main board volume, respectively. 

These figures highlight the concentration of trading activities among a limited set of entities, with minimal participation from retail investors and punters. 

Our humble guess is that PSE trades are dominated by third-party depository institutions like banks and other financial institutions, which constitute our "national team," operating under the indirect behest of the BSP to support the Philippine stock market. 

Since 2020, the steep bear market rallies of the PSEi 30 have been dominated by local financial institutions. 

Aside from the post-recess "afternoon delight" phenomenon, this explains the significant use of the pre-closing 5-minute floating period for both pumps and dumps (mostly pumps) to shape the PSEi’s end-of-day outcome. 

Apart from this, the establishment's embrace of "benchmarkism" or status signaling through market or economic symbols has been evident in the membership mechanics of the PSEi 30 composite.

The Philippine Stock Exchange (PSE) constructs the PSEi 30 not just to favor companies with strong price performance, but also to serve as a "moat for elite-owned and controlled firms," as we pointed out back in February 2023. 

The PSE announced changes in the PSEi 30 membership last week. It removed price laggards, including Wilcon Depot, from the downstream real estate services sector, and Nickel Asia from the nickel mining sector. 

They were replaced by AREIT, an Ayala-owned Real Estate Investment Trust, and the high-flying China Banking Corp (CBC), thereby expanding the Sy Group's influence with a second bank in the PSEi 30, effective February 3, 2025. (Figure 6, lower chart) 

Still, with low domestic savings to support stocks, foreign money flows play an instrumental role in determining the outcome of the PSEi and the PSE. 

It goes without saying that the recent sell-offs have resulted from foreign money outflows that have overwhelmed the low savings and insufficient use of credit by the 'national team' and local punters to support the index. 

VII. Foreign Selling Drives PSEi 30 Decline, Low Savings Contribute to Thin Market Volume and the Sunk Cost Fallacy

Figure 7

This week's net foreign selling of Php 1.9 billion accounted for 9.3% of gross volume. Over the last three weeks (YTD), net foreign outflows have represented 8.8% of the gross volume, which have coincided with the PSEi 30's breakdown from 6,529 in 2025. (Figure 7, topmost window) 

Although seventeen of the thirty issues closed the week lower, averaging a 0.92% decrease, the performance of the top 5-6 biggest market cap issues determined the 0.88% fall of the PSEi 30 based on free-float adjusted performance. (Figure 7, middle graph)

In short, gains from SM and BPI were insufficient to offset the declines of ICT, BDO, SMPH, AC, and ALI. 

The broader market sentiment was similarly fragile, with declining issues outnumbering advancing issues on all five trading days last week. Declining issues led by 86. This negative trend has been ongoing since the start of the year. 

On a sectoral basis, while SM led holding firms gained with 0.2%, the material declines of ICT (-3.46%) weighed on services (-2.02%), and SMPH (-3.05%) and ALI (-2.33%) pulled down the property sector (-1.99%). 

Once again, this downturn coincides with eroding volume. Main board volume slumped 21.14%, from Php 4.8 billion to Php 3.8 billion. (Figure 7, lowest diagram) 

Overall, with current "trickle-down" political-economic dynamics leading to an unparalleled savings-investment gap, the PSEi 30 would find scarce support from diminishing savings, accompanied by rising risks of debt-financed malinvestments. 

Despite support from the "National Team," which only compounds capital goods mispricing and amplifies resource malinvestments, this merely delays the inevitable: an unpalatable market clearing process or an unpleasant rectification of past mistakes. 

The first law of holes states, "If you find yourself in a hole, stop digging." Yet, the sunk-cost fallacy ensures that the mainstream will remain in vehement denial and persist in digging deeper.

Why PSE’s Share of Active Stock Market Accounts Dropped to 20% in 2022, The Role of Savings in the Stock Market

 

Here then is a crucial point: you cannot plan markets. By their very nature, you can only set people free so that they can interact and exchange, and thereby develop markets themselves. Similarly, several of the socialist countries, seeing the importance of the capital markets in the West, have been trying to develop stock exchanges, but with little success. First, again, because stock markets cannot be planned, and, second, because, as we will see further, you cannot have markets in titles to capital if there are still virtually no private owners of capital in existence—Murray N. Rothbard 

 

In this issue 

 

Why PSE’s Share of Active Stock Market Accounts Dropped to 20% in 2022, The Role of Savings in the Stock Market 

I. As Part of the Capital Market, the Role of the Stock Market is Economic 

II. How Stock Market Deficits Compound on the PSE’s Liquidity Predicament 

III. While the Growth of New Stock Market Accounts Slowed, the Share of Active Accounts Plummeted! 

IV. Demographic Distribution: Most Affected Groups were (Generally) Gen-Z Group and Seniors  

V. Declining Bank Liquidity, Falling PSE Volume and the PSEi 30’s Bear Market; What to Expect 

 

Why PSE’s Share of Active Stock Market Accounts Dropped to 20% in 2022, The Role of Savings in the Stock Market 

 

Philippine PSE 2022 Investor’s Profile: The growth rate of new accounts fell while the share of active accounts dived. Why? Scant savings caused the decline in PSE volume and equity losses.  

 

I. As Part of the Capital Market, the Role of the Stock Market is Economic 

 

PSE, June 5, 2023: The number of online stock market accounts rose by 8.6 percent in 2022 to 1,258,907 accounts. Despite the muted growth in online accounts compared to previous years, the average value per online transaction rose by 33.2 percent to Php 46,236.40 from Php 34,701.80 in 2021. While close to 100,000 online accounts were added last year, its non-online counterpart recorded a decrease of 7,156 accounts to 453,827. Given this, the total stock market accounts registered in 2022 was at 1,712,734, up by 5.7 percent from 2021’s 1,620,017 accounts. “The growth in accounts may have been subdued in 2022 but I expect an uptick in numbers again with the foray of new stock brokerage firms in the online trading space and the upcoming rollout of stock investing features in finance apps,” said PSE President and CEO Ramon S. Monzon. 

 

In 2022, the PSEi 30 returned -7.8%, anchored on a plunge in peso volume (19.9% gross and 20.8% main board). 

 

Remember that equity transactions are always funded.   

 

On this note, the depressed volume reflects a shortfall in domestic savings or disposable income and credit flows (from local savers, foreign savers, & money from loans unbacked by savings or "fiduciary media"). 

  

Fundamentally, capital markets serve as an intermediary to channel savings into investments.  The capital market primarily consists of stocks (stock-related instruments such as ETFs, REITs, and more) and fixed-income securities (debentures, commercial and Treasury bonds).   

 

While a crucial aspect is financing, its obverse side is entrepreneurial resource allocation.  

 

So, we depart from the incumbent BSP chief's perspective of the capital market.   

 

What does that mean? What it means is that, over time, if you wait long enough, the market cap will probably be growing faster than the economy. What that says is that, over time, initially, economies are driven by big personalities and families. Of course, it is only appropriate that we are talking about the Ayalas or the San Miguels. 

 

But, over time, as the economy tries to grow and get more and more financing from everyone, we need capital markets. Of course, banks usually grow ahead of capital markets but, hopefully, soon to follow are other ways of raising capital-the biggest two of which are the bond market and the stock exchange. (Medalla, 2023) 

 

Banks outgrow the capital markets fundamentally because of existing policies biased against a market-based distribution system and the implicit "trickle-down" policies embraced by authorities. 

Figure 1 

 

Proof? 

 

Banks have almost monopolized the financial industry; the aggregate bank share of the total financial resources has been close to its highest level at 82.5% as of April 2023, which raises concentration risks. (Figure 1: topmost pane)  

 

And this is supposed to represent a "sound" financial system? 

 

And capital markets seem neither about adrenalin boosters nor feeding the government. 

 

In a way, the stock market is like your pulse rate. You get excited, it goes up. You hear Professor Medalla, it goes down because he lulls you to sleep. 

 

But what matters is the long-run average. You need people to watch the economy 24/7. You need people who watch companies 24/7. 

 

By the way, this means great value for the government itself. Because as companies make accounting [disclosures] to their stakeholders, the BIR [Bureau of Internal Revenue] gets a lot of data. [So,] it gets harder and harder to have multiple books. As the government, in turn, gets more money, it can have more money for financing infrastructure and social development. (bold added) 

 

Au contraire, instead of helping savers distribute capital to its best and most efficient or productive commercial use through price discovery, feeding the government, which translates to consumption than production and competition with the markets for resources, fosters economic imbalances. 

 

Of course, the government uses the bond markets to raise Treasury funds from savers. Thanks to the capital markets, the Philippines' public debt hit a milestone of Php 13.9 trillion last April 2023.  

And easier access to the public's savings could be one reason behind the botched attempt by the state-owned Landbank to acquire (nationalize) the PDS from the PSE.  

Based on ADB data, the Philippines has the second smallest bond market in the region after Vietnam. 

 

The imperatives of the capital markets are savings and capital formation, as explained by economist Fritz Machlup: 

 

A process of capital formation is set in motion only if the income which is not consumed is used for production.  It does not matter whether the saver is himself the entrepreneur or whether he places his purchasing power or money capital at the disposal of another entrepreneur. The process of transferring savings to the producers may be performed through the borrowing and lending facilities of the savings banks, but mainly through the capital market which centres around the securities market. Which one of these organizations for transferring savings will be used will depend in each case on judgments as to risk and liquidity (the possibility of withdrawal or realization by selling) and prospects as to yields. If the savings are put into savings bank deposits, the yield will be equivalent to the interest payment. If they are used to purchase fixed interest-bearing securities (mortgage loans, bonds, debentures) the yield will take the form of interest and capital appreciation. If they are used to purchase shares, the yield will consist of dividends and capital appreciation. The relative attractiveness of savings deposits, the bond market and the stock market, changes with the different phases of the trade cycle. (Machlup, 1940) 

 

With this in mind, it comes as no surprise why organized and managed pumps and dumps (mostly during the pre-closing phase) have become a defining characteristic of the PSE. (Figure 1, middle window, chart from technicstock.net) 

 

When the prevailing perception is that capital markets should perform political objectives, it is bound to become inefficient, which forfeits their implied benefits.  And present conditions only elaborate such decadence. 

 

II. How Stock Market Deficits Compound on the PSE’s Liquidity Predicament 

 

Declining savings has not only been evident in the economy but have also surfaced in the PSE through diminishing volumes or market liquidity.  Philippine gross savings rates have been on a structural downtrend. (Figure 1, lowest chart) 

 

And deflating asset prices becomes a self-reinforcing dynamic as many participants become "HODL" (hold on for dear life) while enduring reduced paper wealth.   

 

Further, via the wealth effect, personal or corporate balance sheet deficits may lead to diminished consumption.   

 

For a debt-dependent economy, cascading asset prices lower collateral values magnifying collateral calls or margin calls, which amplifies the risks of liquidations.   

In turn, such pressures could also prompt a pullback in financing production, which could cause dislocations in the supply chain and lower production.  

 

Easy money "stimulus" will be of little help when the pool of wealth ("real" savings) declines.  Although it buys time, it only aggravates the underlying conditions. 

 

Finally, asset losses are not the only consideration; inflation rubs salt in the balance sheet wound. 

 

III. While the Growth of New Stock Market Accounts Slowed, the Share of Active Accounts Plummeted! 

 

Symptoms of these forces are evident in the degeneration of participation or penetration rates at the Philippine Stock Exchange.   

Figure 2 

 

Yes, nominal stock market accounts continue to grow, but since peaking in 2018, its growth rate has fallen.  It grew by 5.72% in 2022, down from 16% in 2021.  Total PSE accounts of 1.713 million represented about 1.5% of the 115.5 million population in 2022.  (PSE, 2023) (Figure 2, highest graph) 

 

Yet, more people have indirect exposure to the stock markets via mutual funds, UITFs, and ETFs than direct ones.   Although here, we will be discussing the direct trading accounts via the network of PSE brokers.  

 

The net gain of 92,717 accounts in 2022 was the smallest since 2017's 95,623. (Figure 2, second to the highest pane) 

 

The corroding returns of the PSEi appear to have resonated with the public's participation.  While the record PSEi high in early 2017 motivated the influx of the biggest crowd in 2018, the succeeding grinding bear market has reverberated with dwindling participation rates. (Figure 2, second to the lowest and lowest charts) 

Figure 3 

 

The online platform continues to draw retail participation, though. It was up by 8.62% in 2022—strikingly, a plunge from the double-digit growth rates from 2014-2021, which averaged 32.05%!  

Nonetheless, with traditional or brick-and-mortar accounts suffering a 1.6% contraction in 2022, the online platform snared the majority (73.5%) of PSE investors. (Figure 3, topmost, second to the highest left and right charts) 

 

The thing is, the deterioration has not only been on the slower entry of new players but on the share of active accounts, which fell to 20.2%, the lowest since at least 2012!  In short, the PSE may have 1.7 million accounts, but only 345k were active. (Figure 3, second to the lowest graph) 

 

Market internals data as daily trade, advance decline spread, and the number of issues traded daily confirm this. 

 

Aside, including new entries, the sharp drop in active participants has been consistent with the entropy in volume/liquidity. (Figure 3, lowest window) 

 

IV. Demographic Distribution: Most Affected Groups were (Generally) Gen-Z Group and Seniors

Figure 4 

 

Also, the demographic distribution reveals a sharp decrease on the fringes of the PSE.  Or, the penetration level declined significantly in the youngest and the eldest groups.  This dynamic applies to both online and traditional accounts but includes inactive participants.   

 

Seniors regressed to their pre-2021 levels but were slightly lower in total.  In the context of the online platform, seniors also reverted to pre-2021 levels after the deviant spike in 2021. (Figure 4) 

 

But the generally Gen Z group (18-29), the most vulnerable—reported a dive in account participation below the 2018-2021 levels. 

 

The proposition could be that savings from jobs and income may have been difficult for the Gen Z category to enroll in the stock market. 

 

The bulk of the investors/traders was in 30-60 years of age. 

 

V. Declining Bank Liquidity, Falling PSE Volume, and the PSEi 30’s Bear Market; What to Expect 

Figure 5 

 

Finally, bank liquidity conditions resonate with the peso turnover at the PSE, as shown by cash to deposits and deposit liabilities. (Figure 5, top and second to the highest windows) 

 

Since peaking in 2013, their declines have mirrored the ebbing flow of the PSE's gross volume, which includes special block sales. (Figure 5, second to the lowest graph) 

 

To reiterate, ultimately, savings from capital formation will determine the fate of local equity markets.   And this will be expressed by the peso volume/turnover, where price levels and participation rates should follow.  After all, nothing draws a crowd more than winners.  

 

What to expect? 

 

With an exceedingly low base, the public's participation could grow (under present conditions), but perhaps to reflect population growth. 

 

That said, a "foray of new stock brokerage firms in the online trading space and the upcoming rollout of stock investing features in finance apps" will hardly generate meteoric growth.  

Like the real estate industry, such forecasts reveal the bedrock of mainstream expectations via the distortion of Say's Law "Build and they will come." 

 

That the top 10 brokers have shanghaied no less than 50% of the daily mainboard volume in the face of declining stock market liquidity should make life more difficult for the industry. And institutional brokers comprise most of the daily top 10. (Figure 5, lowest chart) 

 

According to the PSE, 125 brokers are active, and about 32 have online trading platforms.  A back-of-the-envelope calculation means that 115 brokers (mostly retail-traditional models) compete intensely for the morsels.   

 

But again, since savings are the roots, improvement in capital formation will be the foundation for increased returns and penetration levels.  

 

And since there is little attempt to reform the "capital markets" to make these more market-oriented, present policies only entrench the extant imbalances. 

 

Further, with the public programmed to believe that an easy money regime represents the path to utopia, its redistributive effects only lead to boom-bust cycles, which consume capital/savings. 

 

Again, the principal beneficiaries of the politicized capital markets are the elites, who comprise the Forbes 50 wealthiest. 

 

And though the stock market is not a casino, present policies have made it into one.  And sadly, small retail investors pay for it with the depletion of their savings. Ergo, the shrinking direct active participation in the PSE. 

 

Remember, pricing integrity is one of the prerequisites of healthy capital markets.  And the present market structure seems to discount this goal. 

Until then, the current decremental conditions should prevail.   

 

As contrarian investor Doug Casey has adroitly observed, "Trends in motion tend to stay in motion."  

 

____ 

References 

 

Felipe M Medalla: Beyond just a bellwether - the capital markets as catalyst for dynamic and inclusive economic growth, Speech at the inauguration of the Philippine Stock Exchange's new events hall, Manila, 28 May 2023, Bank of International Settlements, June 1, 2023.  

 

Machlup, Fritz The Stock Market Credit and Capital Formation, William Hodge and Company, 1940 Mises.org p.27  

 

Philippine Stock Exchange 2022 PSE Stock Market Investor Profile, PSE.com.ph May 2023