PSEi 30: The ICTSI Show

 

For most people, the most dangerous self-delusion is that even a falling market will not affect their stocks, which they bought out of a canny understanding of value—Leon Levy

In this issue

PSEi 30: The ICTSI Show

I. PSEi’s 30 Regional Outperformance

II. Misleading Index Performance (MSCI World, KOSPI)

III. The Ideological Foundation

IV. How Does This Relate to the PSEi?

V. One Stock, One Index

VI. Volume, Float, and the Shape of the Market

VII. The Intraday Pattern

VIII. Participation Collapse and Capital Consumption

IX. Conclusion: A Late-Cycle Signal 

PSEi 30: The ICTSI Show 

How concentration, liquidity, and selective speculation are reshaping the Philippine benchmark 

I. PSEi’s 30 Regional Outperformance 

Amid simmering political controversy over control of Senate leadership—which will ultimately oversee the forthcoming impeachment proceedings against the Vice President—the Philippine Stock Exchange Index (PSEi) emerged as Asia’s top-performing equity benchmark for the week, rising 2.94%.

Figure 1

This occurred against an otherwise weak regional backdrop. Rising sovereign yields and continued geopolitical uncertainty weighed on sentiment, leaving most Asian bourses under pressure. While a few benchmarks—such as Japan’s Nikkei, Singapore’s STI, and Taiwan’s Taiex—briefly touched intraweek highs, softer closes erased much of the momentum. Indonesia’s sharp correction and weakness in South Korea’s KOSPI dragged broader regional averages lower. (Figure 1, upper window) 

Yet headline index performance can mislead. 

II. Misleading Index Performance (MSCI World, KOSPI) 

Indices are not neutral reflections of reality; they are constructed representations shaped by methodology, market capitalization, and momentum. They measure a perspective. 

Take the MSCI World Index. The MSCI World purports to track 23 developed markets, yet the US now accounts for roughly 72.45% of the benchmark, with information technology alone at 30.6% and financials at 15.33%. (Figure 1, lower image) 

In practice, the MSCI World has become a proxy for US mega-cap tech. The label has quietly decoupled from what's actually being measured. 

Figure 2

South Korea's KOSPI presents a more dramatic case. Samsung and SK Hynix—dominant in global memory chip supply—recently comprised more than half the KOSPI's market capitalization, piggybacking on the speculative melt-up in US AI stocks. (Figure 2, upper diagram) 

SK Hynix joined the trillion-dollar club in late May. The consequence: the KOSPI's headline performance increasingly reflects two companies, not the broader market nor the national economy. 

The dislocation is visible in the underlying data. The Korean won hit an all-time low last week as bond yields climbed—a sharp divergence between price signals and fundamental conditions. 

Market breadth confirms the distortion: stocks hitting new lows spiked even as those hitting new highs continued to fade. (Figure 2, lower visual) 

As liquidity becomes more selective, capital crowds into a narrowing set of perceived winners. Momentum attracts momentum. FOMO and greater-fool dynamics amplify upside moves, especially when leverage enters the system. The result is not broad-based prosperity but increasingly concentrated leveraged speculative blowoffs.

Figure 3

China offers a parallel. Margin financing has surged to levels exceeding those seen during the 2015 equity boom, even as the Shanghai Composite remains below its prior peak. Reaching lower index highs despite greater leverage suggests diminishing returns from credit-fueled speculation: progressively more debt is required to generate the same market effect. (Figure 3) 

Rising concentration, speculative blowoffs, and record leverage: these are not isolated anomalies. They are convergent signals of late-cycle excess.

III. The Ideological Foundation 

This matters because modern central banking increasingly views asset prices as transmission mechanisms of economic policy. 

The logic is straightforward: higher asset prices generate wealth effects, encourage borrowing, support collateral values, and stimulate spending. In this framework, liquidity injections and policy backstops become implicit supports for financial assets. 

Former Federal Reserve Chair Ben Bernanke summarized this philosophy in the aftermath of the dot-com era:

There’s no denying that a collapse in stock prices today would pose serious macroeconomic challenges for the United States. Consumer spending would slow, and the U.S. economy would become less of a magnet for foreign investors. Economic growth, which in any case has recently been at unsustainable levels, would decline somewhat. History proves, however, that a smart central bank can protect the economy and the financial sector from the nastier side effects of a stock market collapse 

That single quote explains the architecture that followed: the successive rounds of monetary accommodation, the reflexive backstops, the tolerance for leverage—all premised on the belief that a competent central bank can contain the fallout from any speculative excess it helped create. Markets did not merely become politicized. They became instruments of policy, kept elevated by design. 

IV. How Does This Relate to the PSEi? 

The Philippine market increasingly displays similar characteristics.

Figure 4

The long-term divergence between the PSEi and International Container Terminal Services Inc. (ICTSI) has become difficult to ignore. 

Since the PSEi peaked in 2017 and entered a prolonged period of stagnation—a bear market, ICTSI has continued to surge, with recent price action increasingly resembling a parabolic advance. (Figure 4, upper window) 

As ICTSI reached a record high of Php 875 on June 3, its weight in the PSEi climbed to roughly 25.5%. (Figure 4, lower chart) 

The implications are significant. 

V. One Stock, One Index 

For the week, the PSEi gained a net 169.72 points, or 2.94%. Yet ICTSI alone contributed approximately 177.63 points to the index. Put differently, ICTSI accounted for more than 100% of the benchmark’s weekly advance (gross), while the remaining components collectively added little or acted as offsets. 

The broader composition of returns reinforces this imbalance.

Figure 5 

Across the PSEi’s 30 members, average weekly performance was only around 0.12%, with 16 issues actually posting losses. Although four of the biggest market cap issues advanced, ICTSI’s 13.62% surge overwhelmingly dominated benchmark performance. (Figure 5, topmost pane) 

Even outside the benchmark, the divergence becomes evident. The broader All Shares Index rose only 1.63%, while aggregate market capitalization increased 2.17%—both materially below the PSEi’s gain. 

Year-to-date performance paints an even starker picture: ICTSI’s share price has surged by 50.8%, while 22 of the 30 listed issues have declined. Remarkably, ICTSI’s strong gains have helped compress overall market losses to an average of just 6.7%! (Figure 5, middle chart) 

VI. Volume, Float, and the Shape of the Market 

Liquidity concentration tells a similar story. 

ICTSI accounted for roughly 29.5% of main board trading volume during the week, exceeding 32% in the final three sessions. 

Foreign buying represented around 9.3% of ICTSI turnover. 

Yet in today’s financialized system, “foreign buying” deserves nuance: overseas registration does not necessarily imply independent foreign institutional capital, as such flows may also reflect affiliates, intermediaries, or networked financial structures linked to domestic interests. 

Broker concentration adds another layer. The top ten brokers accounted for an average of approximately 64% of main-board turnover, underscoring the degree to which market activity remains concentrated among a relatively narrow set of big cap issues. 

This raises a fundamental question about representation. 

The PSEi 30 is intended to track the performance of the country’s 30 largest and most actively traded listed firms and is commonly treated as a barometer of Philippine business conditions. 

Yet context makes the weight anomaly stranger still: ICTSI ranks 16th among PSEi 30 constituents by published assets—Php 568 billion as of Q1 2026. It is not the largest company in the index. 

It is simply the one commanding the most speculative attention or one company has increasingly come to define the behavior of a benchmark meant to represent an entire market. 

Notably, unlike the AI-driven concentration seen in global technology benchmarks, there is little evidence of comparable speculative spillover among ICTSI’s global peers. 

Adani Ports and Shanghai International Port—both larger operators—show no equivalent price behavior. The parabola is local. (Figure 5, lowest images) 

That divergence makes ICTSI’s acceleration even more striking. 

VII. The Intraday Pattern

Figure 6 

Four of the five trading sessions this week followed a recognizable structure: early pumps, momentum that faded or peaked into the close, and pre-close dumps in three of those four sessions. (Figure 6) 

The sequence is not random. Concentrated positions—anchored around largest cap names with broker coordination—set up a strong open. When momentum peaks or the desired level is reached, supply materializes into the closing dump, leaving retail and non-cartel institutional participants on the wrong side of the book. And insiders rearm for the next day’s trade. 

The redistribution dynamic here is straightforward: those who set the opening tone capture the gains; those who follow the signal absorb the unwind. 

The result is similar: headline index strength masks increasingly fragile breadth underneath. 

It is visible in the intraday data with unusual clarity.

VIII. Participation Collapse and Capital Consumption 

Despite repeated modernization initiatives—including digital onboarding, reduced board lots, REIT expansion, market-structure reforms, and other capital-market development programs—active participation in the Philippine equity market has continued to deteriorate.

Figure 7

Active investor participation fell to a record low of 11.8% in 2025. More strikingly, institutional participation did not merely decline in activity; the absolute number of enrolled institutions contracted from 32,284 in 2024 to 29,910 in 2025. (Figure 7, upper pane) 

The participation collapse is not a failure of access. It is a rational response to a market that has repeatedly demonstrated that insiders capture the gains while latecomers absorb the distribution. 

This has broader political-economy implications. 

Sustaining elevated asset prices is not solely about investor confidence or market optics. Equities also function as collateral. Rising share prices support credit expansion directly through pledged securities and indirectly through valuation effects on parallel assets, balance sheets, and spending behavior. 

The reflexive relationship between asset prices and credit expansion is not a side effect of the system. It is one of its central operating mechanisms of fiat systems. 

In this sense, supporting financial asset prices becomes intertwined with a broader economic model dependent on liquidity, leverage, and wealth effects. Policies such as CMEPA, PERA, and related capital-market initiatives reflect this orientation by theoretically channeling savings toward financial assets and expanding the investor base upon which asset-price support depends. 

Instead, what this produces over time is capital consumption disguised as capital formation. Savings intermediated through a distorted pricing mechanism do not necessarily accumulate into productive capital; increasingly, they facilitate redistribution and economic maladjustments. 

The weekly headline performance of the PSEi may communicate one story. Market breadth, volume concentration, and participation trends suggest another. 

Concentration, however, carries its own tradeoffs. 

The more a benchmark depends on a single company, a dominant narrative, or a narrow liquidity channel, the less representative—and potentially more fragile—it becomes. 

When one stock increasingly becomes the market, the benchmark may no longer be signaling broad economic strength. Instead, it may be signaling the progressive narrowing of the channels through which liquidity continues to flow. 

IX. Conclusion: A Late-Cycle Signal 

The PSEi's recent outperformance may say less about broad Philippine corporate strength, the economy and more about the extraordinary influence of a single firm. 

ICTSI's dominance increasingly resembles concentration dynamics observed in other late-cycle markets: narrow leadership, selective liquidity, weakening breadth, and a widening divergence between financial performance and underlying participation. 

The key question is not whether ICTSI can continue to rise indefinitely or even whether its advance can catalyze a broader re-rating across PSEi constituents. Rather, it is whether a benchmark increasingly dependent on a single stock reflects the progressive narrowing of liquidity channels, exposing deeper market, financial, and economic fragilities characteristic of a late-cycle environment. 

A market sustained by increasingly narrow leadership may prove particularly vulnerable to external shocks, especially when global liquidity conditions tighten. The recent crash of Indonesia's JKSE amid mounting currency pressures illustrates how quickly seemingly stable market narratives can unravel once economically sensitive conditions turn less favorable. (Figure 7 lowest diagram)

The PSEi’s January Mirage: GDP Slumps as Liquidity, Curve Control, and Index Engineering Mask the Stress

 

The reality is, if we tell the truth, we only have to tell the truth once. If you lie, you have to keep lying forever—Rabbi Wayne Dosick 

In this issue

The PSEi’s January Mirage: GDP Slumps as Liquidity, Curve Control, and Index Engineering Mask the Stress

I. GDP Shock, the PSEi 30 Barely Blinks

II. Liquidity-Led Asian Bull Run—The Philippines Tags Along

III. What the PSEi 30 Shows—and What It Conceals

IV. The Five-Minute Market: January 30

V. Index Output vs. Concentrated Reality

VI. ICTSI: The PSEi 30’s Silent Underwriter

VII. Concentration Risk Is Not Easing—It’s Shifting

VIII. Liquidity Concentration Remains Entrenched

IX. Manufactured Gains, Accumulating Fragility

XI. Mining–Oil Resurrection: Performance at the Margins, Volume Tells the Real Story

X. Expect a Pullback from the Overbought Mining-Oil Index

XI. When GDP Breaks, the PSEi 30 Follows

XII. Easy Money Fails—Again and Again!

XIII. The Pro-Cyclical Politics of Market Participation; Lessons from the 1994 GSIS–SSS Stock Loan Programs

XIV. PERA: Risk Transferred, Not Eliminated; When Loss Absorption Becomes a Policy Fault Line

XV. Philippine Peso Stress Is the Signal, Not the Noise

XVI. Trump’s Weak Dollar Policy: A Temporary Reprieve—Not a Resolution

XVII. From Gaming the Index to Gaming the Curve

XVIII. Macro Stability as Policy Objectives of Yield Curve Interventions

XIX. The PSEi 30 as Collateral Infrastructure

XX. Conclusion: January’s PSEi 30’s Performance: Not A Vote Of Confidence—But A Managed Outcome 

The PSEi’s January Mirage: GDP Slumps as Liquidity, Curve Control, and Index Engineering Mask the Stress 

Why Philippine equities rose as GDP, the peso, and credibility deteriorates

I. GDP Shock, the PSEi 30 Barely Blinks 

Figure 1

In a week when Philippine authorities announced yet another growth shock—GDP slowing further from a revised 3.9% in Q3 to just 3.0% in Q4 2025—the domestic headline equity index closed the week down a negligible 0.07%. (Figure 1, upper table) 

For full-year 2025, GDP growth decelerated sharply to 4.4%, from 5.7% in 2024—a material slowdown that we will examine in detail in a separate post. 

Yet markets barely reacted. 

Despite deteriorating macro fundamentals, January’s performance pushed the PSEi 30 up 4.56% month-on-month (MoM) and 7.96% year-on-year (YoY), its strongest combined MoM and YoY showing since September 2024. 

On the surface, the Philippine equity market appeared resilient—almost indifferent—to worsening growth data. 

II. Liquidity-Led Asian Bull Run—The Philippines Tags Along 

This performance placed the PSEi 30 alongside most easy-money-driven Asian equity markets, many of which extended their 2025 bull runs into the first month of 2026. 

According to Bloomberg data, 16 of 19 major Asian indices ended January higher, with an average gain of 4.7%. South Korea’s tech-heavy KOSPI led the surge, climbing nearly 24% in January and touching successive record levels. Other markets—including Singapore, Taiwan, Indonesia, Pakistan, and Sri Lanka—also carved out new highs. (Figure 1, lower graph) 

In this context, Philippine equities benefited from the regional liquidity tide. But the PSEi 30’s gains tell only part of the story. 

III. What the PSEi 30 Shows—and What It Conceals 

Media commentary has largely attributed January’s index strength to optimistic domestic narratives, while blaming external forces and corruption for lingering weaknesses (self-attribution bias). 

What has been almost entirely ignored is how index construction, free-float weighting, and trading mechanics materially shape reported performance. 

The public remains largely uninformed about how a small cluster of heavyweight constituents—rather than broad-based participation—drives index outcomes. 

January 30 offers a textbook example. 

IV. The Five-Minute Market: January 30  

Figure 2

On January 30, the PSEi 30 jumped 1.7% in a single session. But roughly 87% of that gain occurred during the five-minute pre-closing (floating) period, not during continuous trading!  (Figure 2, topmost window) 

Banks—particularly BPI—were central to this move. 

BPI was down 0.27% heading into the pre-closing phase. During the runoff, however, the stock reopened nearly 9.73% higher—effectively a 10% spike!! (Figure 2, middle image) 

This unusually large end-of-session repricing almost single-handedly altered the index outcome. 

Other major beneficiaries:

• BDO (+1.96%)
• Metrobank (+2.82%)
• SM Investments (+0.96%)
• Ayala Land (+1.43%) 

All were among the top 10 stocks by free-float market capitalization. 

In a wink of an eye, January’s "outstanding" index performance was successfully locked in. 

V. Index Output vs. Concentrated Reality 

This divergence becomes clearer when decomposing returns. 

The average month-on-month return of PSEi 30 component stocks was only 2.86%, and 2.85% on a full market-cap basis—well below the index’s 4.56% headline gain. (Figure 2, lowest diagram) 

Why the gap? 

Because the most significant contributions came from free-float-weighted gains concentrated in a handful of names—led principally by ICTSI, and reinforced by BPI, Ayala Corp, Metrobank, and Meralco. As of January 29, these five stocks accounted for 39.7% of the index’s free-float market capitalization. 

VI. ICTSI: The PSEi 30’s Silent Underwriter

Figure 3

The PSE’s largest constituent, ICTSI, has been racing toward successive record highs throughout January. This performance is magnified by its free-float weight of 17.82%, an all-time high as of January 29th. (Figure 3, topmost pane) 

In practical terms, ICTSI has bankrolled the PSEi 30’s returns since 2024. 

With approximately 55% of the Services sector’s full market capitalization, ICTSI has been primarily responsible for the sector’s 8.7% MoM and 33% YoY gains. 

Sectoral strength, in this case, is less a reflection of broad economic vitality than of single-firm dominance amplified by index mechanics. 

VII. Concentration Risk Is Not Easing—It’s Shifting 

Interestingly, despite ICTSI’s outsized role, the combined weight of the top five index constituents appears to have peaked. After reaching a record 53.02% in mid-December, their share eased slightly to 51.64% by January 29th. (Figure 3, middle chart) 

This can be read in two ways: 

One. A welcome broadening of gains beyond the largest names, or

Two. A growing vulnerability stemming from the index’s continued dependence on a narrow elite—increasingly dependent on tactical flows rather than structural diversification. 

At this stage, trading behavior suggests the latter interpretation is more consistent with reality. 

VIII. Liquidity Concentration Remains Entrenched 

January trading data reinforces this conclusion. 

The top 10 brokers accounted for an average of 61.5% of daily main board volume, down marginally from 63.5% in December. (Figure 3, lowest visual) 

On a weekly basis, however, this concentration trend has been rising steadily since the second half of 2025. 

Meanwhile, the top 10 traded issues represented 58.8% of daily volume, down from 65% in December. 

These are modest improvements—but they do not alter the core reality: trading activity remains heavily concentrated among a small group of players and stocks, who, in turn, shape index outcomes. 

IX. Manufactured Gains, Accumulating Fragility 

Taken together, January’s performance was not the product of broad-based confidence or improving fundamentals. It was manufactured through index construction, free-float concentration, and strategically timed flows—particularly during thin post lunch trading, pre-closing and runoff windows. 

While the gains appear orderly on the surface, the risk concentration embedded within the PSEi 30 is reticently intensifying. This fragility is neither well understood nor adequately discussed—yet it defines the true state of the market far more than the headline index level ever could. 

X. Breadth Confirms Concentration, Not Strength 

There is more evidence that January’s headline gains masked a deeply concentrated market.

Figure 4 

Despite the PSEi’s strong January performance, market breadth barely improved. 

The advance–decline spread widened by only 30 issues, a stark contrast to 2023’s spread of 184, when the PSEi posted a more modest 3.45% YoY gain—yet still ended that year down 1.77%. (Figure 4 topmost window) 

In other words, stronger index performance today is being achieved with far weaker participation. 

XI. Mining–Oil Resurrection: Performance at the Margins, Volume Tells the Real Story 

A significant contributor to January’s gains came from the Mining and Oil sector, riding the surge in global metal prices. 

The sector’s 10-component index jumped 25.8% MoM and an extraordinary 175% YoY, off a deeply depressed base. Unlike 2006–2012, miners are not just outperforming but decisively diverging from the PSEi 30. (Figure 4, middle image) 

Volume followed performance. Mining turnover surpassed that of the once-favored (PLUS and BLOOM) gaming stocks—higher by 18% in January. Yet, PLUS fell 19.01% MoM, BLOOM rose 12.6%, and Philweb surged 56.3%—a clear signal of institutional preference for high-volatility, high-beta trades. (Figure 4, lowest diagram)

This divergence highlights an uncomfortable reality: capital is rotating not toward fundamentals, but toward popular narratives, leverage and momentum.

The Mining sector’s share of main board volume surged to 7% in January, contributing materially to the 33.6% YoY increase in the PSE’s main board volume and the 36.5% rise in total/gross market turnover. Cross transactions accounted for 17.3% of MBV. 

Meanwhile, the Property sector’s share of gross turnover rose to 21.7% from 18.74%, while Holdings increased to 15.26% from 14.21%. Property had negative returns (-3.43% MoM, -.26 YoY) while holdings were buoyed (+4.86 MoM, +2.25% YoY) 

Together, these shifts reinforce a widening divergence between mainstream index performance and the previously shunned, cyclical, or politically unpopular sectors, particularly mining and oil. 

We have long anticipated the sector’s revival, and recent performance has clearly validated our call. 

But wait… 

X. Expect a Pullback from the Overbought Mining-Oil Index 

Though we expect the mining index to endure a sizeable pullback from their overextended, overbought levels—no trend moves in a straight line—this does not negate the broader regime backdrop supporting the sector. 

A growing set of global structural risks consistent with a potential regime transformation—manifested in a deepening war economy, the weaponization of the dollar, sanctions, protectionism, fiscal dominance, persistent central bank easing, and widening geopolitical tensions—should place a cap on any sustained decline. 

In this context, we should also expect partial rotation within the complex, particularly from metals toward oil-gas, rather than a wholesale reversal of the trade. 

XI. When GDP Breaks, the PSEi 30 Follows 

Despite the apparent regularity of post–lunch recess rallies—what I have previously labeled "afternoon delight"—and the repeated appearance of coordinated large-cap based "pre-closing" pumps (and dumps), the PSEi 30 has historically tracked GDP trends, albeit with a lag.

Figure 5

The most recent upside cycle began in mid-November 2025 and appears to have peaked by mid-January 2026. Notably, the index remained conspicuously indifferent to the Q4 GDP collapse, as if the slowdown had already been discounted—or managed. (Figure 5, topmost window) 

History suggests otherwise. 

At the onset of BSP rate cuts in August 2024, the PSEi surged nearly 15%, as easing was sold as a growth elixir. That optimism proved short-lived. (Figure 5, middle graph) 

GDP slowed sharply from 6.5% in Q2 2024 to 5.2% in Q3, barely stabilized in Q4, and was followed by a 10.5% PSEi plunge in Q1 2025. 

By Q3 2025, GDP had deteriorated further to 3.9%, and the PSEi collapsed another 18%. 

This pattern is not accidental. 

XII. Easy Money Fails—Again and Again! 

It bears repeating: RRR cuts, policy rate easing, expanded deposit insurance, and persistent fiscal stimulus—including pandemic-era deficits—have NOT revived growth. (Figure 5, lowest chart) 

As history has shown, they have accompanied or worsened economic deceleration. 

Yet the mainstream narrative insists these tools are the only solution.

Figure 6

The same logic is now being applied to equities: more liquidity, more intervention, more management of outcomes. (Figure 6, topmost diagram) 

Ironically, rather than igniting a genuine bull market, the PSEi increasingly requires non-market interventions to manufacture the appearance of macro stability. 

XIII. The Pro-Cyclical Politics of Market Participation; Lessons from the 1994 GSIS–SSS Stock Loan Programs 

Aside from direct market interventions, the politics of engineering a bull market have evolved.

Beyond the Capital Markets Efficiency Promotion Act (CMEPA)—which we have repeatedly criticized—the mainstream has revived proposals reminiscent of the defunct GSIS–SSS stock loan programs to further stimulate retail participation. 

These initiatives, however, reflect fundamentally pro-cyclical policymaking. 

The GSIS and SSS stock loan programs—most notably the GSIS Stock Purchase Financing Program (SPFP) launched in 1994—coincided with the peak of the PHISIX (now the PSEi). 

The 1997 Asian Financial Crisis inflicted severe losses, exposing the program’s structural flaw: embedding leverage and mark-to-market risk into institutions designed for capital preservation. 

The crisis did not create this fragility; it merely revealed the contradiction. 

XIV. PERA: Risk Transferred, Not Eliminated; When Loss Absorption Becomes a Policy Fault Line 

Current discussions on deepening participation now extend to PERA (Personal Equity and Retirement Account), where savings are managed by accredited administrators and invested in qualified instruments such as mutual funds, UITFs, insurance products, and government securities. 

While PERA removes explicit leverage, it introduces principal–agent problems and asymmetric information risks, with outcomes largely driven by professional managers rather than individual contributors—with fee structures, asset allocation, career advancement and herding behavior playing a decisive role in their decision process. 

Losses being absorbed at the individual level is systemically healthy. But the moment the state attempts to cushion or prevent those losses, it recreates the SPFP problem—only more slowly and diffusely. 

In short, policies framed as "enhancing participation" amplify bubble cycles and effect a tacit redistribution from savers to institutional intermediaries, ultimately eroding—rather than strengthening—the foundations of the capital market. 

XV. Philippine Peso Stress Is the Signal, Not the Noise 

The accelerating GDP slowdown validates our long-held view that the USDPHP breach of the 59 “soft peg” was a signal of mounting structural stress. (Figure 6, middle image) 

It also casts the BSP’s gold sales in a different light—not merely as FX defense, but as an indication of latent stress across government, central bank, and bank balance sheets. 

As we wrote last November: 

The peso’s breach of 59 isn’t just a technical move. It’s the culmination of structural stress that monetary theater can no longer hide.

XVI. Trump’s Weak Dollar Policy: A Temporary Reprieve—Not a Resolution 

The peso’s recent recovery owes less to domestic strength than to global easing dynamics. US dollar weakness—driven by policy stance and market expectations under President Donald Trump—pushed the DXY down roughly 0.8% MoM and 9.8% YoY. 

As a result, USDPHP ended January at 58.86, temporarily slipping below the 59 threshold (+0.85% YoY, +0.12% MoM). 

This reprieve is unlikely to last. Once balance-sheet stress becomes more visible, a test of the 60-level appears increasingly inevitable.

XVII. From Gaming the Index to Gaming the Curve 

At January’s close, the Philippine BVAL yield curve revealed yet another layer of policy response. (Figure 6, lowest chart)

Figure 7

The curve reflects a deliberate, policy-induced bearish steepening. As Q4 GDP slowed to 3%, the BSP eased the front end and belly to support bank funding conditions and preserve financial stability. Simultaneously, 20–25 year yields rose month-on-month, exceeding November 2025 levels, as markets imposed a fiscal and inflation credibility premium amid global term-premium repricing. (Figure 7 topmost image) 

The contradiction is stark: domestic accommodation is deployed to stabilize balance sheets, while long-duration yields signal rising skepticism over fiscal sustainability and inflation containment. 

XVIII. Macro Stability as Policy Objectives of Yield Curve Interventions 

This curve management feeds directly into the gaming of the PSEi 30. 

Historically, widening 10Y–3M and 10Y–6M spreads have coincided with CPI pressure, as accommodation persists and inflation risk migrates through FX and expectations channels. (Figure 7 middle chart) 

Meanwhile, the PSE’s Financial Index has risen across both steepening (2020–22) and flattening (2023) regimes—not because of curve “health,” but because of curve control. (Figure 7, lowest graph) 

Through coordinated yield-curve signaling, peso stabilization, and institutional balance-sheet absorption, authorities project macro stability despite slowing growth—redistributing stress away from markets and toward households, future inflation, and shrinking policy space.

XIX. The PSEi 30 as Collateral Infrastructure 

Beyond boosting expectations and managing optics, the theatrics surrounding the PSEi 30 serve a more practical and underappreciated function: inflating and stabilizing collateral values across the financial system. 

For banks, insurers, trust entities, and large institutions, equity holdings—particularly index-heavy, highly liquid names—are not merely investments. They function as collateral, balance-sheet buffers, and capital-supporting assets used in repo transactions, interbank funding, structured products, and internal risk models. 

In an environment of slowing GDP, rising long-end yields, and latent balance-sheet stress, mark-to-market declines in these assets would immediately tighten financial conditions. Holding the PSEi 30 together—especially its largest constituents—helps preserve collateral valuations precisely when funding pressures are building elsewhere. 

This helps explain why support is selective rather than broad-based. Propping up the largest free-float names delivers the greatest collateral impact per peso deployed, even as market breadth deteriorates. The objective is not market health, but balance-sheet continuity. 

In this light, the PSEi 30 becomes less a reflection of economic confidence and more a policy-adjacent tool—a stabilizing surface that allows banks and institutions to extend accommodation, delay recognition of stress, and avoid procyclical tightening in credit and funding markets. 

But this stability is conditional. Should equity collateral values falter, or when cash flow/liquidity problems intensify, the feedback loop would reverse—forcing deleveraging, tightening credit, and accelerating the very slowdown policymakers are trying to defer.

XX. Conclusion: January’s PSEi 30’s Performance: Not A Vote Of Confidence—But A Managed Outcome 

Index gains were manufactured through concentration, liquidity choreography, curve control, peso management, and the tacit inflation of collateral values. 

What appears as market resilience is, in reality, the financial system preserving its own scaffolding amid deteriorating growth—a classic symptom of a late-cycle phase rather than a genuine expansion. 

In such phases, markets are stabilized not to signal strength, but to delay adjustment. Stress is redistributed away from asset prices and toward households, future inflation, fiscal credibility, and shrinking policy space. 

The longer stability is engineered rather than earned, the more abrupt the eventual repricing becomes—when collateral support weakens and policy capacity is finally exhausted. 

___

Select References (quote and validations) 

Prudent Investor Newsletter, The USD-PHP Breaks 59: BSP’s Soft Peg Unravels, Exposing Economic Fragility, Substack, November 02, 2025 

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

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

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