EO-110 and the Politics of Price Suppression: How the Energy Emergency Is Becoming a Nationwide Economic Intervention

 

Economics does not say that isolated government interference with the prices of only one commodity or a few commodities is unfair, bad, or unfeasible. It says that such interference produces results contrary to its purpose, that it makes conditions worse, not better, from the point of view of the government and those backing its interference—Ludwig von Mises 

In this issue:

EO-110 and the Politics of Price Suppression: How the Energy Emergency Is Becoming a Nationwide Economic Intervention

I. From Oil Shock to Emergency Response

II. The Rice Policy Template

III. Administrative Pricing Returns: The Suspension of the Power Spot Market

IV. Price Control Proof Is Already in the Streets: Shortages Appear

V. Crisis Messaging and Political Theater

VI. Crony Gains in an Energy Emergency

VII. The Financial Stability Motive

VIII. Markets Push Back

IX. Intervention Begets Intervention

X. Echoes of the Energy Crisis—Marcos Sr. vs Marcos Jr.

XI. Conclusion: Suppressing Scarcity, Shifting the Pressure 

EO-110 and the Politics of Price Suppression: How the Energy Emergency Is Becoming a Nationwide Economic Intervention 

How EO-110, emergency powers, and BSP policy are converging into a nationwide price-control regime. 

I. From Oil Shock to Emergency Response 

In a previous report, we warned that the Philippines might be entering the early stages of an oil shock.

Events over the past week suggest the policy response is now accelerating. 

Within a span of only a few days, the government has rolled out an unusually rapid sequence of interventions. 

• On March 24, the administration issued Executive Order 110, declaring a national energy emergency.
• On March 25, Congress moved to grant emergency authority to suspend fuel excise taxes.
• On March 26, the Bangko Sentral ng Pilipinas (BSP) held an off-cycle policy meeting and decided to keep interest rates unchanged. 

Each step has been framed as an effort to protect consumers from the impact of rising energy costs. 

Yet taken together, they reveal something broader: the emergence of an integrated policy approach aimed at suppressing the economic transmission of the oil shock. 

This strategy is not entirely new. 

It closely resembles the template already deployed in another politically sensitive sector—rice. 

II. The Rice Policy Template 

Over the past year, rice policy has increasingly relied on administrative intervention. 

The government imposed maximum suggested retail prices (MSRP), released reserves through the National Food Authority, introduced the highly publicized Php 20 rice program, and deployed fiscal subsidies to farmers and importers. 

In effect, the state has attempted to contain consumer prices by transferring costs elsewhere—through fiscal spending, balance-sheet adjustments, and administrative supply management. 

Public choice theorists such as James M. Buchanan and Geoffrey Brennan in The Power to Tax describe this phenomenon as fiscal illusion: the obscuring of the true cost of government through indirect financing—such as borrowing, inflation, or off-budget transfers—allowing policymakers to sustain the appearance of relief while shifting the burden forward. 

This same policy template now appears to be extending into energy markets. 

The national response to the oil shock has included:

• Suspension of transport fare increases
• fuel subsidies for operators
• intensified price monitoring and enforcement
• emergency procurement of oil supplies
• the suspension of fuel excise taxes
• intervention in electricity markets to contain price spikes 

Demands for price controls are also broadening, now encompassing LPG and imported rice. 

As with the rice program, these measures aim to soften the visible price impact of scarcity—while redistributing the underlying costs across the fiscal system and the broader economy.

Figure/Table 1

Policy intervention appears to be expanding sector by sector. Measures initially introduced to stabilize politically sensitive goods are gradually extending into energy markets and financial policy. (Table 1) 

III. Administrative Pricing Returns: The Suspension of the Power Spot Market 

The spread of price suppression is not limited to transport fuels. 

On March 25, the Energy Regulatory Commission ordered the temporary suspension of the Wholesale Electricity Spot Market (WESM) across the Luzon, Visayas, and Mindanao grids after simulations suggested electricity prices could surge to around ₱9 per kilowatt-hour amid the Middle East energy shock. 

The WESM is the Philippines’ real-time electricity trading platform, where elite owned and controlled power producers and distributors buy and sell electricity based on supply and demand conditions. Prices in this ‘caged’ market normally fluctuate to reflect fuel costs, generation capacity, and grid constraints. 

By suspending the market, regulators effectively replaced price discovery with administrative allocation. 

The objective is straightforward: prevent a sudden spike in electricity prices from feeding into consumer inflation. 

But the economic implications are significant. 

Spot markets exist precisely to coordinate supply and demand under changing conditions. When prices rise, they signal scarcity and encourage additional generation or conservation. 

Administrative suspension interrupts that signal. 

Instead of electricity being allocated through price adjustments, dispatch decisions increasingly become centralized—determined by regulatory directives rather than market incentives. 

The result may temporarily contain visible price increases, but it also risks creating deeper distortions in the power sector. 

Power producers must now operate under uncertain compensation conditions, while distributors and large consumers lose the market signals that normally guide electricity procurement. 

In effect, one of the country’s most important energy markets has been replaced—at least temporarily—by administrative pricing. 

This development reinforces a broader pattern emerging across sectors: the gradual substitution of price mechanisms with regulatory control. 

But suppressing prices does not eliminate the underlying imbalance between supply and demand. 

As Friedrich Hayek famously argued in The Use of Knowledge in Society, prices function as signals coordinating dispersed knowledge across the economy. Suspending markets may suppress volatility, but it also suppresses the information that allows the system to adjust. 

If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them 

Or suppressing those signals inevitably disrupts the coordination process. It also shifts the adjustment to other parts of the economy.

Yet authorities have not only suspended WESM; they are reportedly considering permanently repealing the only partially deregulated segment of the energy sector, as well as the removal of VAT. Both measures may provide temporary relief, but such band-aid solutions carry the risk of future unintended consequences. 

Moreover, while reducing taxes may be desirable, without corresponding spending constraints this approach would likely worsen fiscal deficits and heighten the fragility of public finances. 

In effect, short-term interventions may shield consumers today, but they also deepen structural vulnerabilities that could amplify costs tomorrow. 

IV. Price Control Proof Is Already in the Streets: Shortages Appear 

Basic economic theory predicts that price ceilings eventually produce shortages. 

Early signs of this dynamic are already emerging. 

Reports indicate that more than 400 gasoline stations have temporarily closed, citing supply difficulties even as authorities insist that fuel inventories remain sufficient. 

Public transport is showing similar strains. 

Jeepneys in Quezon City and bus operators in Metro Manila (about 20%) and Baguio City (up to 50%) have significantly reduced operations, with stranded commuters and growing protests highlighting the mismatch between controlled fares and rising fuel costs. 

As an aside, this is just the first few days! 

Despite subsidy rollouts, the economics of operating public transport under capped fares have become increasingly difficult.

Figure 2

The result is a classic outcome described in the literature on price ceiling: supply contraction rather than price adjustment. (Figure 2, upper window) 

Retail markets are beginning to reflect the same pressures. 

Supermarkets and some food manufacturers have signaled price increases beginning April 1, reversing a March commitment to uphold a temporary two-month price freeze. The Department of Trade and Industry (DTI), however, insists that any price adjustments should not take effect until April 16. 

In the aviation sector, the pattern has been equally revealing. 

After the president warned that aircraft might be grounded if fuel shortages worsened, Philippine Airlines assured the public that jet fuel supplies were sufficient for the ‘foreseeable future.” 

Shortly afterward, the airline quietly cut several domestic and international flight routes  suggesting fuel conservation moves. 

These episodes illustrate a recurring feature of interventionist policy regimes: the widening gap between official reassurance and market behavior. 

V. Crisis Messaging and Political Theater 

Public messaging surrounding the energy situation has evolved rapidly. 

Initially, officials emphasized that there was ‘no energy crisis.’ 

More recently, the government has declared an energy emergency while simultaneously insisting that there is still no reason to panic. 

The pattern echoes a famous observation often attributed to Otto von Bismarck:

never believe anything until it has been officially denied. 

Policy actions suggest a far more serious assessment than the rhetoric implies. 

Authorities have begun cracking down on alleged fuel hoarding, floated the possibility of repealing elements of the country’s oil deregulation law, and raised the prospect of removing the value-added tax on petroleum products (as noted above). 

At the extreme end of the policy spectrum, discussions have even surfaced about the possibility of an energy lockdown should supply conditions deteriorate further. 

As political economist Albert O. Hirschman observed in The Rhetoric of Reaction, crisis politics often produces a distinctive rhetorical pattern: policies framed as temporary necessities gradually become permanent features of governance. 

Taken together, these measures suggest a steady expansion of administrative control not only over the energy sector, but more broadly across society. 

VI. Crony Gains in an Energy Emergency 

While the policy framework emphasizes consumer protection, the distribution of benefits within the energy sector tells a more complex story. 

Several large corporate groups appear poised to gain from the shifting landscape. 

Petron Corporation, a subsidiary of San Miguel Corporation (SMC), has reportedly sourced discounted Russian crude, including last week’s shipments of roughly 700,000 barrels. 

At the same time, Tycoon and SMC chair, Ramon S. Ang has revived proposals for the government to acquire Petron—a move that could effectively transfer part of the firm’s humungous debt burden onto the public balance sheet. 

Such a shift reflects what Gordon Tullock described as rent-seeking dynamics: firms capture gains during favorable market conditions, yet seek to socialize losses when the cycle turns. Private upside, public downside. 

Other developments point in a similar direction. Amid public pressure against coal, policymakers have signaled support for its “temporary” expansion under the banner of energy security—even as official rhetoric continues to favor renewables. 

Despite its political unpopularity, Department of Energy data indicate that coal accounted for an all-time high 62% of gross power generation in 2024. (Figure 2, lower image) 

A subsidiary of Manila Electric Company, Meralco PowerGen Corp. (MGEN), has reportedly expressed interest in assets linked to Semirara Mining and Power Corporation (PSE: SCC). 

Notably, some of these assets had already been subjected to regulatory or contractual rebidding processes prior to the current crisis.  

In that context, the present moment may be less a sudden policy shift than an acceleration of an existing trajectory—one in which administrative actions reshape ownership and market structure. The result is a coal sector that may not only revive, but consolidate under a few hands through policy-mediated channels.

Meanwhile, announcements surrounding the Camago-3 field within the Malampaya Phase 4 gas field development have been presented as evidence of incoming domestic supply. Yet such projects typically take years to materially affect output, and gas contracts remain indexed to global prices.  Absent subsidies, price relief is unlikely in the near term. For now, these announcements function more as reassurance than resolution. 

While the timing of benefits to consumers remains uncertain, the consortium—particularly Tycoon Enrique Razon led Prime Energy—is clearly positioned to capture upstream gains 

As Mancur Olson observed in The Rise and Decline of Nations, crises tend to strengthen “distributional coalitions”—organized interests that secure concentrated benefits while dispersing costs across the broader public. 

The pattern is hardly new. Frédéric Bastiat, in The Law, warned that when the state becomes an instrument for particular interests to extract from the public, law itself is transformed—from a protector of rights into a vehicle for legalized transfer. 

The emerging picture suggests not merely an energy response, but a reconfiguration of advantage. The beneficiaries appear to be those corporate groups already positioned to consolidate and potentially cartelize segments of the country’s energy supply chain. 

In effect, the crisis is not only redistributing costs—it also seems to be concentrating access to resources, decision-making power, and control in fewer hands. 

VII. The Financial Stability Motive 

The government’s intervention in energy and monetary policy may extend beyond protecting consumers. 

Energy shocks transmit rapidly through the financial system: higher fuel prices feed into consumer inflation, which in turn pressures the central bank to tighten policy. The BSP recently revised its 2026 inflation forecast to 5.1%—well above its 2–4% target, underscoring the magnitude of underlying price pressures. Rising interest rates reduce asset valuations and weaken collateral across the banking system.

Figure 3 

As an aside, the BSP’s 5.1% 2026 inflation forecast reveals much about their expectations. With January and February CPI at 2% and 2.4%, this implies that the average CPI for the remaining ten months would need to reach roughly 5.68%. Such a trajectory would push monthly CPI above 6%, potentially testing or exceeding the 8.7% high recorded in February 2023! If realized, this would reinforce what appears to be our long projected third wave of the CPI cycle since 2015. (Figure 3, upper graph) 

Banks in the Philippines are heavily exposed to property lending and government securities. A rapid rise in rates could trigger cascading balance-sheet pressures—falling bond prices, declining property valuations, and rising non-performing loans. From this perspective, suppressing the visible impact of the oil shock may help delay financial tightening. 

The BSP’s off-cycle decision to hold policy rates steady has been widely interpreted as part of this stabilization effort. Officials from the Bureau of the Treasury have acknowledged or admitted that maintaining stable borrowing conditions in the bond market was an important consideration. 

In effect, the policy response aims to keep inflation, interest rates, and asset prices contained simultaneously. 

These constraints are consistent with the structural limitations faced by semi-peripheral economies. The Philippines’ persistent savings–investment gap makes it reliant on external capital, which limits independent monetary policy and exposes the financial system to global market pressures. As Giovanni Arrighi observed, countries in the semi-periphery are structurally dependent on foreign financing and currency, leaving central banks with limited room to maneuver. 

The BSP is therefore not simply choosing between “good” and “bad” options; it is deciding which part of the balance sheet to protect first. 

VIII. Markets Push Back 

Financial markets rarely remain passive. The US dollar–Philippine peso exchange rate has surged to a record 60.55, marking a historic low for the peso. 

At the same time, government bond yields—particularly in the one- to seven-year segment—have moved decisively higher, underscoring growing unease about fiscal stability and inflation risks. (Figure 3, lower chart) 

Although Philippine equity markets have declined, trading patterns suggest that downside volatility is being deliberately managed, or at least cushioned, within the heavily weighted components of the PSEi-30 index. 

The market’s verdict appears clear: the Bangko Sentral ng Pilipinas (BSP) is likely to absorb external pressures through currency adjustment rather than aggressive rate hikes and use of reserves, constrained by fiscal realities. 

Inflation is nearing 5%, with second-round effects increasingly visible across transport, food, fertilizer, and electricity costs. These pressures are no longer isolated—they are feeding into broader economic feedback loops. 

Meanwhile, signs of strain are becoming more evident across the broader economy. 

The retail sector continues to undergo restructuring. Marks & Spencer has withdrawn its operations despite earlier signals of recalibration, while Robinsons Retail has announced the closure of its No Brand outlets. The conglomerate is also reportedly considering the possibility of delisting from the Philippine Stock Exchange. 

Taken together, these developments may reflect more than isolated corporate decisions. They point to a tightening environment for both consumers and listed firms, as financing conditions gradually shift and economic pressures intensify.

IX. Intervention Begets Intervention

Figure/Table 4

Intervention often follows a self-reinforcing cycle. Initial controls distort market signals, producing shortages that then justify further administrative action. (Figure 4) 

The trajectory of recent policy decisions follows a pattern long recognized in economic theory.

Austrian economist Ludwig von Mises argued that partial government intervention in markets tends to generate unintended distortions that eventually require additional intervention. 

Wrote the great von Mises 

Price control is contrary to purpose if it is limited to some commodities only. It cannot work satisfactorily within a market economy. The endeavors to make it work must enlarge the sphere of the commodities subject to price control until the prices of all commodities and services are regulated by authoritarian decree and the market ceases to work.

Either production can be directed by the prices fixed on the market by the buying or the abstention from buying on the part of the public; or it can be directed by the government’s offices. There is no third solution available. Government control of a part of prices only results in a state of affairs which—without any exception—everybody considers as absurd and contrary to purpose. Its inevitable result is chaos and social unrest. 

The preeminent Dean of Austrian School of Economics, Murray Rothbard’s concept of triangular intervention helps explain how regulating one set of exchanges can distort others, setting off a chain of interventions across sectors. 

A triangular intervention occurs when an intervener either compels a pair of people to make an exchange or prohibits them from making an exchange. The coercion may be imposed on the terms of the exchange or on the nature of one or both of the products being exchanged or on the people doing the exchanging… 

Directly, the utility of at least one set of exchangers will be injured by the control. Indirectly, as we find by further analysis, hidden, but just as certain, effects injure a substantial number of people who thought they would gain in utility from the imposed controls. The announced aim of a maximum price control is to benefit the consumer by giving him his supply at a lower price; yet the objective effect is to prevent many consumers from having the good at all. The announced aim of a minimum price control is to insure higher prices to the sellers; yet the effect will be to prevent many sellers from selling any of their surplus. Furthermore, the price controls inevitably distort the production and allocation of resources and factors in the economy, thereby injuring again the bulk of consumers. And we must not overlook the army of bureaucrats who must be financed by the binary intervention of taxation and who must administer and enforce the myriad of regulations. This army, in itself, withdraws a mass of workers from productive labor and saddles them onto the remaining producers—thereby benefiting the bureaucrats, but injuring the rest of the people. 

More broadly, the expansion of state authority during crises was famously analyzed by historian Robert Higgs, who observed that emergency conditions often lead to permanent increases in government control over economic activity. 

The emerging policy response to the oil shock appears to be following this familiar path.

• Price controls lead to shortages.
• Shortages trigger enforcement actions.
• Enforcement expands administrative authority.
• Administrative authority creates new political and economic beneficiaries. 

The cycle then repeats.

X. Echoes of the Energy Crisis—Marcos Sr. vs Marcos Jr. 

The Philippines has confronted energy shocks before. But the institutional setting of the crisis today differs profoundly from the one that shaped the policy response half a century ago. 

During the global oil shocks of the 1970s—particularly the 1973 Oil Crisis and 1979 Oil Crisis—the Philippines was already operating under authoritarian rule. Ferdinand Marcos Sr. had declared Martial Law in the Philippines in September 1972, consolidating political power and weakening institutional checks on executive authority. 

Energy policy therefore unfolded within a centralized political system capable of imposing controls, directing credit, and reorganizing industries with limited resistance. 

The current oil shock, by contrast, is unfolding under the presidency of Ferdinand Marcos Jr. within a formally democratic political structure. Instead of authoritarian command, policy is emerging through a rapid layering of interventions—executive orders, emergency powers, regulatory suspensions, subsidies, and monetary accommodation. 

This difference matters.

Figure/Table 5 

Energy shocks have struck the Philippines under both Marcos administrations. The key difference lies in the institutional pathway of intervention: centralized command under martial law in the 1970s versus layered regulatory and fiscal intervention within a democratic framework today. (Figure/Table 5) 

In the 1970s, authoritarian institutions allowed the state to impose controls directly and sustain them over time. Today, similar economic objectives must be pursued through a more fragmented political process involving subsidies, administrative pricing, and financial policy coordination. 

Yet the economic trajectory may still converge. 

The interventionist policies of the 1970s ultimately culminated in the Philippine external debt crisis of 1983, when mounting fiscal deficits, rising external borrowing, and weakening investor confidence forced a restructuring of sovereign obligations. 

Today’s macroeconomic backdrop exhibits its own form of imbalance. 

Fiscal deficits remain historically elevated. Public debt has risen sharply relative to national output. Liquidity conditions—reflected in rapid monetary expansion and sustained deficit financing—have reached levels rarely seen in the country’s economic history. 

Measured as shares of GDP, many of these indicators appear manageable. But GDP itself increasingly reflects government spending and credit expansion rather than productivity growth. 

In that sense, the underlying dynamics bear an uncomfortable resemblance to the earlier era.

The key difference is speed. 

During the 1970s, the accumulation of distortions took years to unfold. Today, early symptoms are appearing within days of the policy response. 

Transport shortages are already emerging only days after the declaration of the energy emergency. If such distortions persist, the policy logic may lead to further escalation: larger subsidies, deeper price controls, emergency procurement programs, and expanding administrative authority. 

Economic crises have historically been fertile ground for political centralization. Severe shocks—whether economic, geopolitical, or social—often generate the conditions under which governments justify extraordinary powers. 

The Philippines’ current constitutional framework imposes safeguards against such outcomes. Yet history also shows that institutional constraints can erode rapidly under sustained crisis conditions. 

Whether today’s oil shock remains an economic problem—or evolves into a broader political one—will depend less on official assurances than on the incentives shaping policy decisions in the months ahead. 

XI. Conclusion: Suppressing Scarcity, Shifting the Pressure 

The oil shock may only be the beginning. EO-110 could come to be seen not as a solution, but as the opening phase of a broader cycle of intervention. 

From rice to fuel, from transportation to energy markets, policy is increasingly aimed at suppressing how rising costs flow through the economy—seeking to contain inflation, stabilize financial conditions, and preserve asset values. 

Yet economic reality rarely accommodates such efforts for long. Suppressing prices does not remove scarcity; it merely redirects it. The adjustment reemerges elsewhere—through fiscal strain, currency pressure, supply disruptions, or financial instability. 

The Philippines may therefore be entering not just an energy emergency, but a wider economic experiment: an attempt to delay market adjustment through expanding intervention. History suggests these efforts seldom end as intended. 

The real question is no longer whether adjustment will occur—but where the pressure will surface next.

 

 

 

Liquidity at the Top: The PSEi 30’s Two-Months Rally Meets Structural Fragility Amid Middle East War Risks

 

Bubbles are mechanisms of wealth redistribution and destruction – with detrimental consequences for social and geopolitical stability. Boom periods engender perceptions of an expanding global pie. Cooperation, integration, and alliances are viewed as mutually beneficial. But perceptions shift late in the cycle. Many see the pie stagnant or shrinking. A zero-sum game mentality dominates. Insecurity, animosity, disintegration, fraught alliances, and conflict take hold—Doug Noland 

In this issue

Liquidity at the Top: The PSEi 30’s Two-Months Rally Meets Structural Fragility Amid Middle East War Risks

I. PSEi 30’s Early Start: A Strong Tape — On the Surface

II. Headline Strength vs. Structural Fragility

III. PSEi 30’s Concentration Risk: ICTSI’s Growing Dominance

IV. Breadth and Liquidity: Gains with Caveats

V. Confidence Policy and Market Structure Risk

VI. Middle East War: Geopolitical Energy Shock and Philippine Macro-Financial Vulnerabilities

VII. Conclusion: When Index Strength Outruns Market Health 

Liquidity at the Top: The PSEi 30’s Two-Months Rally Meets Structural Fragility Amid Middle East War Risks

Index strength masks concentration, policy engineering, and rising geopolitical fragility 

I. PSEi 30’s Early Start: A Strong Tape — On the Surface 

The PSEi 30 closed the week up 2.26%, pushing its 2‑month return to 9.22%—one of the strongest early-year performances in recent years.

Figure 1

The Philippine market appears to be benefiting from abundant global liquidity and rotational flows. Last year’s Asian laggards—Thailand and the Philippines—are now among the top YTD performers, alongside continued momentum in high flyers such as South Korea, Taiwan, Japan, and Singapore. (Figure 1, upper window) 

Yet the strength has emerged despite an “unexpected” Q4 GDP slowdown to 3%. 

In February alone, the PSEi 30 posted a 4.46% MoM and 10.22% YoY gain. (Figure 1, lower table) 

The divergence between slowing output and rising asset prices was not organic—it was liquidity-driven, fueled by foreign inflows and heavy concentration in select index names. 

The tape is strong. The base is narrow. 

II. Headline Strength vs. Structural Fragility 

Cap-weighted indices increasingly function less as barometers of broad market health and more as mirrors of heavyweight concentration. 

This is not unique to the Philippines. The MSCI World Index, for example, is heavily skewed toward the United States and further concentrated in mega-cap technology firms. 

But scale matters. 

In deep, liquid markets, concentration often reflects earnings dominance, structural passive flows, and sustained institutional participation. While representation may be distorted, price discovery remains broadly competitive.

Figure 2

By contrast, in thinner markets, rising concentration is compounded by shallow turnover and limited participation. In such conditions, late-session or post-recess “afternoon delight” flows, along with pre-close (5-minute float) coordinated pump-dumps targeting heavyweight stocks, can exert an outsized influence on index levels. (Figure 2, topmost pane) 

The outcome is not simply greater concentration, but structural fragility — where headline index strength may owe more to liquidity conditions, market microstructure, and political dynamics than to broad-based economic vitality. 

Index gains, therefore, should not automatically be interpreted as evidence of systemic health. 

In shallow markets especially, strength at the top can coexist with weakness underneath. 

III. PSEi 30’s Concentration Risk: ICTSI’s Growing Dominance 

Performance has become increasingly concentrated. 

International Container Terminal Services, Inc. (ICTSI) now dominates index and sector dynamics: 

• Services index: +10.3% MoM, +45.74% YoY, +19.82% YTD (February 2026)
• ICTSI share of services sector volume: 52.35%
• Services sector share of main board value: ~35% 

ICTSI’s weight in the Services Index rose from 55.31% in January to a record 56.4% in February. (Figure 2, middle diagram) 

Its share of main board turnover increased from 15.32% to an all-time high of 18.48%, approaching the 19.8% peak recorded by PLUS during its July melt-up. 

Last February, foreign fund flows accounted for 16% of ICTSI’s total turnover—the highest level since at least October 2025 (Figure 2, lowest graph)

Figure 3

Within the PSEi 30, ICTSI’s weight surged to a record 19.3% on February 25, closing the week at 18.9%, as of February 26th.  (Figure 3, topmost image) 

The top five heavyweights now account for 51.51% of the entire index or five issues comprise more than half of the PSEi 30. 

This means: A 1% move in ICTSI contributes nearly as much to index performance as several smaller constituents combined. 

This is mechanical leverage embedded in construction. 

That is not breadth — it is structural leverage. 

February’s advance saw 20 issues rise, 9 decline, and 1 unchanged, with an average gain of 3.92% — slightly below the 4.46% free-float index gain, illustrating the impact of cap weighting. (Figure 3, middle graph) 

Year-to-date, ICTSI’s +26.23% outperformance has amplified this divergence. Among the top ten stocks (71% of index weight), gains were supported by AC, JFC, MBT, and MER, yet the average gain of the 19 advancing issues was 6.8% — still below the 9.22% index gain. (Figure 3, lowest chart) 

That February and YTD gap is weighting. This is not just concentration. 

It is weight-amplified performance dispersion. 

IV. Breadth and Liquidity: Gains with Caveats

Figure 4

The PSE’s market breadth improved modestly in February, extending January’s gains and helping buoy sentiment for the first time since 2019. (Figure 4, topmost diagram) 

Main board volume rose 16%, marking its second consecutive year of improvement. However, aggregate figures mask internal concentration, with ICTSI absorbing a substantial portion of incremental flows. (Figure 4, middle visual) 

Improvements in breadth have not been proportionately reflected in volume distribution or broader technical structures. 

V. Confidence Policy and Market Structure Risk 

The PSEi bottomed in mid-November 2025 — shortly before the appointment of a prominent tycoon to the Finance Department. (Figure 4, lowest image) 

Prior to this, a three-way energy deal involving SMC, MER, and AEV was announced. 

Subsequently:

• Real Property Taxes (RPTs) were suspended for energy firms.
• GEA-ALL subsidies to renewables were shifted to consumers.
• Banking system net claims on government surged to record highs in December. 

These are not neutral developments.

Figure 5

Expanded fiscal financing through the banking system injects liquidity that can spill into asset markets. (Figure 5, topmost window) 

Support measures for key corporates improve earnings visibility and collateral value. 

Infrastructure and energy subsidies reinforce balance sheet narratives for dominant index constituents. 

San Miguel shares initially led the PSEi 30 higher in Q4 2025 but have since given up more than half of their gains. (Figure 5, middle graph) 

MER and AEV shares joined the shindig along with the PSEi 30. (Figure 5, lowest chart) 

In this context, confidence appears to be a central component of policy transmission—whether through the Bangko Sentral ng Pilipinas or the Department of Finance—aimed at stabilizing sentiment, supporting collateral values, and encouraging distributional effects into GDP. However, confidence-driven liquidity does not eliminate underlying structural fragility, particularly in a concentrated and thin market environment. 

It merely elevates sensitivity to shocks. 

VI. Middle East War: Geopolitical Energy Shock and Philippine Macro-Financial Vulnerabilities 

The renewed outbreak of conflict in the Middle East involving the United States, Israel, and Iran introduces immediate geopolitical risk premia into global markets, with energy serving as the primary transmission channel. 

However, the duration of the conflict matters significantly. A short-lived escalation may generate temporary price spikes, while a prolonged confrontation would embed a more persistent risk premium across commodities and financial assets.

Globally, any credible threat to Iranian production—or worse, disruption of the Strait of Hormuz—could trigger sharp upside volatility in oil prices. Roughly 20% of the global oil supply passes through the Strait of Hormuz.  Even without a physical blockade, elevated risk alone tightens supply expectations and lifts futures curves. 

Higher crude prices would feed into transportation, manufacturing, and electricity costs, raising the probability of a renewed inflation impulse. 

Central banks could face a stagflationary dilemma: tolerate higher inflation or tighten policy into weakening growth. 

Financial markets would likely reflect classic risk-off dynamics—strength in oil and gold, alongside pressure on broad equities, particularly in energy-importing economies. 

For the Philippines, these global effects would be amplified by structural vulnerabilities. As a net oil importer, higher crude prices would directly raise domestic fuel, power, and logistics costs. According to the World Bank, Philippines net imports of energy use amounts to 54% as of 2022. 

This would place upward pressure on CPI and household expenses, further squeezing consumption—the (savings-investment gap) backbone of Philippine GDP. 

It would also increase pressure on debt-financed deficit spending, particularly as fiscal financing partly relies on foreign portfolio and external savings to bridge funding gaps. Higher global rates and a weaker peso could raise borrowing costs and heighten refinancing risks. 

A widening trade deficit driven by higher import bills would likely weaken the peso, reinforcing imported inflation pressures. 

This dynamic complicates policy for the Bangko Sentral ng Pilipinas. Any resurgence in inflation expectations could delay easing or necessitate tighter financial conditions, raising borrowing costs for property, consumer credit, leveraged corporates, and public finance. The resulting environment carries stagflationary characteristics: slower growth combined with sticky prices, increasing duration risk, interest-rate volatility, and credit risk across the financial system and the broader economy. 

As such, equity implications would be uneven—mostly adverse.

Figure 6

Energy and mining shares may respond positively to higher commodity prices, particularly upstream oil and gas producers and exploration firms that directly benefit from rising metal and crude prices. (Figure 6, upper chart) 

The Philippine mining and oil index has already been outperforming and diverging from the PSEi 30, suggesting early sectoral rotation toward commodity-linked exposures. Escalation in the Middle East would likely reinforce this divergence by sustaining risk premia in the gold and energy markets. (Figure 6, lower graph) 

In contrast, downstream refiners, distributors, and power utilities—especially those operating under regulated tariffs or fixed contracts—may face margin compression as input costs rise faster than they can be passed through. 

Transport, logistics, and consumer-facing sectors would similarly come under pressure from elevated fuel and operating expenses, alongside a further erosion of household purchasing power. 

At the macro level, sustained deficit financing in a higher-rate environment could intensify crowding-out effects, as government borrowing absorbs liquidity that might otherwise support private sector investment. Combined with a declining standard of living and rising cost pressures, this raises the risk of credit stress and higher default rates across vulnerable households and leveraged firms. 

An additional layer of vulnerability lies in Overseas Filipino Worker (OFW) remittances. The Middle East remains a major employment hub for Filipino workers. Escalation or regional instability could disrupt employment conditions (estimated 2.2 million OFWs in the Middle East), delay remittance flows, or prompt repatriation risks. While remittances have historically shown resilience even during regional tensions, heightened uncertainty could dampen household confidence and consumption at the margin—particularly when layered onto rising domestic inflation. 

In sum, the conflict raises the probability of a commodity-driven inflation shock superimposed on already liquidity-sensitive markets. 

For the Philippines, the combined pressures of higher oil prices, currency weakness, policy constraints, and potential remittance volatility point to heightened market volatility and widening sectoral divergence amid slowing GDP growth. This increases stagflationary and credit risks. 

In such an environment, tactical positioning and selective exposure are likely to be more prudent than broad-based risk allocation. 

VII. Conclusion: When Index Strength Outruns Market Health 

The PSEi 30’s early-year advance is best understood as a liquidity-driven, weight-amplified rally rather than evidence of systemic market strength. With ICTSI alone approaching one-fifth of total index weight and the top five constituents exceeding half of the index, performance has become increasingly mechanical—driven by where liquidity concentrates, not how widely it is distributed. 

This structure matters. In a cap-weighted index operating within a thin market, marginal flows into heavyweight stocks can produce outsized headline gains even as broader conditions remain fragile. 

As geopolitical risks intensify—particularly through energy prices, inflation pressures, and policy constraints—the same index mechanics that amplified the rally could just as easily magnify downside volatility. 

In this context, selective and tactical exposure is more defensible than broad risk allocation. Headline strength may persist, but it should not be mistaken for resilience.