Price controls take some time for their flaws and distortions to develop: for the longer they last, the more do their controlled prices diverge from the prices that would be obtaining on the free market—Murray N. Rothbard
In this issue:
Three Markets, One Signal: How the PSEi, Peso and BVAL
Priced Suppression in October
I. The PSEi’s “Rotation” Is the Cover Story
II. A Floor Is a Price Control
III. GCASH: The IPO With a Subsidy Bid Underneath
IV. “Don’t Panic” Is a Policy
V. The Yield Curve Takes No Orders
VI. Whac-a-Mole Economics
VII. Periphery to Core
VIII. What October Priced: The Cost of Suppressing
Adjustment
VIII. Conclusion: October’s Cost of Suppressing Adjustment
Three Markets, One Signal: How the PSEi, Peso and BVAL Priced Suppression in October
Every intervention bought stability in one market and billed another. In October, the bill is showing up in bond yields and FX reserves as global liquidity drains from the outside
I. The PSEi’s “Rotation” Is the Cover Story
Figure 1
The PSEi 30 ended October almost unchanged month on month (-0.02%). It is still down 6.16% year to date and 4.2% year on year. The headline hides a redistribution of index leadership. (Figure 1, table)
ICTSI, the largest heavyweight, surrendered 89.54 gross points (-5.84%). The next four largest names (SM +7.84%, BDO +4.42%, BPI +1.08%, SMPH +10.34%) contributed 91.23 points and more than offset it. Breadth tilted positive at 18 advancers against 12 decliners. Yet heavier losses in SCC, DMC and CNPF dragged the simple average change across the 30 members to -0.66%. (Figure 1, middle image)
The gap between -0.02% and -0.66% comes from free-float market-cap weighting. A handful of names decide the headline. After ICTSI’s drop, the five largest still command 55.24% of the index. (Figure 1, lowest graph)
Figure 2
The wider PSE tells the real story.
Breadth was 1,811 advancers against 2,113 decliners, which extends broad-market selling to eight of the first ten months of 2026. (Figure 2, topmost pane)
Main Board volume (MBV) rose 20.4% year on year to Php 129.67 billion, but cross transactions took 27.71% of it. (Figure 2, middle diagram) SM’s Php 8.736 billion block alone was about 24% of the month’s cross volume.
ICTSI’s share of Main Board volume (MBV) climbed from 19% in September to 23.75% in October, while foreigners net sold about Php 1.3 billion of the stock as it fell. Local institutional buying absorbed the selling. (Figure 2, lowest chart)
The index’s “stability” rests on an engineered domestic support for a heavyweight under foreign liquidation.
II. A Floor Is a Price Control
Figure 3
The top 10 brokers averaged 66.8% of daily MBV, and the top 10 issues averaged 72%. That concentration put an implicit floor near 5,600 under the PSEi all month. (Figure 3, topmost visual)
A floor held by a few brokers and a few issues is a price control, whatever name it goes by.
The PSEi is a free float market capitalization-weighted benchmark. It does not measure the breadth or health of the equity market. The media and the establishment treat it as if it did, though five issues decide most daily outcomes. Confusing the two is how benchmarkism disguises concentration as stability.
Leadership rotated in October, but concentration did not go away. It only changed where the support was pointed. Extreme trading concentration, persistent negative breadth and thinning liquidity are the symptoms, and the distorted price signals they produce misallocate capital.
Ironically, almost no one comments on it—as if it is a taboo.
III. GCASH: The IPO With a Subsidy Bid Underneath
The GCash listing offered another illustration of the market's dependence on concentrated liquidity.
GCASH’s weekly share of Main Board volume fell from 34.9% to 9.22%. The stock swung -5% on the week of October 23 and +5.42% the following week. It closed at Php 6.61, a hair above the Php 6.60 offer price. The price is where it is because someone is buying it. (Figure 3, middle image)
UBS, the sole stabilizing agent, bought 786.57 million shares at an average of Php 6.571 in the week ending October 23. That cost about Php 5.17 billion and used up 65% of its maximum stabilization buying capacity in the first trading week. The budget is the 1.204 billion overallotment shares, worth Php 7.95 billion at the offer price. That leaves about 417.5 million shares, roughly Php 2.75 billion. The support window runs about 30 days from the October 20 listing. There is no update on this as of October 30th.
The mechanism is simple. The agent sells the overallotment shares short at the offer price, then buys them back in the open market to defend it. A bid sits just under Php 6.60 until the money runs out. It is the PSEi’s floor in miniature: a price held by a dedicated buyer and not by savings.
An IPO can generate enormous turnover and retail
participation without leaving behind durable secondary-market liquidity. The
question is what happens when the support expires.
IV. “Don’t Panic” Is a Policy
The peso is the second signal.
The peso touched Php 64.17 per dollar on October 27. That was its 33rd record low of 2026, the eighth in October, and the fifth consecutive record session from October 21 to 27. The President then said, “Don’t panic...we have defenses,” and USDPHP retreated to Php 63.74 by the week’s close.
No leader makes that statement without his agencies behind it. It signals that the political leadership will do what it takes to “stabilize” the peso. The motive is to look stable. The policy is intervention. The effects arrive later… or in other prices.
A managed retreat does not touch the cause, which is the savings-investment gap. Free-lunch politics and the policies behind it sustain spending beyond what the economy can finance from its own production.
The USDPHP rose 1.76% in October, taking its gain to 8.42% year to date and 8.31% year on year. That was the second biggest monthly rise of 2026 after March’s 5.35% (from February's 57.665 to March's 60.748). (Figure 3, lowest diagram)
The external side of the gap is tightening. OFW remittances, tourism, FDI and portfolio inflows have all weakened. BPO and AI-linked electronics exports help but cannot close the gap, and they carry their own exposure.
A reversal in AI capital spending would move from global markets into Philippine export receipts and widen the deficit.
Administered prices, regulatory relief, FX management and accommodative monetary measures have postponed the recognition of the imbalance. Postponement is not resolution. The pressure surfaces through other prices, balance sheets and markets.
With the balance of payments (BoP) under record pressure and reserves falling, the BSP’s quasi-soft peg has given way to a low-volume, low-volatility crawl. The string of records is that adjustment showing up.
The BSP still has “tools,” but none is free. It can run down reserves, lever up through repos and derivatives, monetize part of its gold, borrow more (via the National Governnment) or turn to trade and price controls. These extend the process, but none creates dollars, domestic savings or productive resources.
September shows the cost. Gross international reserves fell from $104.846 billion to $99.494 billion, a $5.352 billion drop to a three-year low.
Figure 4
The BSP attributes it mainly to its net foreign exchange operations. The composition is the tell. Other Reserve Assets, the bucket that holds net derivative positions, repo assets and investment pools, fell from $15.471 billion to $9.985 billion, about $5.5 billion and 35% in one month. That is larger than the entire decline. Gold valuation took off another $1.287 billion. Total currency and deposits rose about $1.54 billion. The drain came from the derivative and repo positions behind the peso defense, not from the plain securities and deposits the headline suggests. (Figure 4, topmost image)
The September BOP deficit was a record $3.144 billion, taking the year-to-date deficit to a historic $9.087 billion—which is just a hairline short of the DBCC’s revised 2026 target of US$9.2 billion (1.8 percent of GDP) with a quarter to go. Borrowed support can defer the adjustment. It cannot remove the financing constraint. (Figure 4, middle chart)
V. The Yield Curve Takes No Orders
The sovereign bond market supplied the third signal.
The public watches the PSEi and the peso. It pays little attention to government bonds, and that is where the cost of financing the state shows up.
More than anything else, these pressures are most clearly reflected in the interest rate environment, as evidenced by the Philippine Treasury's BVAL yield curve.
The yield curve shifted upward across all tenors in October compared with September, with positive spreads and the largest increases concentrated in the belly of the curve—a bulge. (Figure 4, lowest chart)
More importantly, from the one-year tenor onward, yields are at or near multi-year highs. Rising yields are the market’s way of repricing inflation, duration risk and the cost of financing the state.
The fiscal connection is direct. Government borrowing competes with private investment for finite pools of savings. As financing needs rise, the state’s demand for funds presses against the resources available to businesses (and even banks) seeking capital for production and expansion.
This is the crowding out effect—and it does not require a textbook interest-rate shock to operate.
Financial repression adds another channel. Directed credit, captive institutional demand and policies that steer savings toward government or favored borrowers can suppress the visible cost of financing while displacing alternative uses of capital. The allocation changes even when the headline rate does not fully reveal the pressure.
The result is a distorted investment process: financing follows political and institutional priorities rather than the unrestrained signals of market prices, risk and expected returns.
The rising yield curve is the market pushing back against that arrangement. Government can influence the terms under which savings are mobilized. It cannot command away scarcity.
Figure 5
Equities hide the weakness through benchmark concentration. The peso absorbs external pressure through intervention. Bonds reprice the cost of the state. As evidence, the Philippine 10-year Treasury yield has climbed to multi-year highs even as the PSEi tests its 2025 lows (Figure 5, topmost window)
Three markets, one imbalance.
VI. Whac-a-Mole Economics
This is the intervention spiral I call Whac-a-Mole Economics. Support the PSEi and the pressure moves to the peso and bonds. Lean on the peso and the valve opens in equities and bonds. Suppress one price and the imbalance resurfaces in another.
The mechanism is not mysterious. Prices coordinate competing claims over scarce resources. Interfering with their adjustment does not remove the scarcity. It changes where the pressure builds, who absorbs it and when the cost becomes visible.
The price signal is not the disease. It is the
information that reveals scarcity. Suppress the signal and the distortion
grows while its symptoms migrate across markets and time.
VII. Periphery to Core
The Philippines is not alone in this.
The magnified paroxysm across several equity benchmarks—the Indonesian JKSE, Korea’s AI-heavy KOSPI, and, more recently, Brazil’s Bovespa—exhibits a common denominator. (Figure 5, middle visual)
As an aside, in Brazil, Lula's reelection triggered a rout in Brazilian stocks, deepening an already prolonged contraction in Latin America's equity-fund industry, where more than 400 equity funds have disappeared and IPO activity has stalled. (Figure 5, lowest image)
Yet each crash has a local headline, whether politics or AI, but they share the global liquidity cycle.
The crashes did not need to arrive on the same day to demonstrate this. Peaks came at different points in the year, and the common condition is liquidity withdrawal.
I call this periphery-to-core transmission.
Withdrawal first exposes the weakest links: the markets,
sectors, and balance sheets most dependent on cheap financing, leverage, and
steady inflows. Rising yields then collide with accumulated malinvestments and
balance-sheet mismatches. The war economy, supply disruptions, incumbent
monetary policies, and fiscal conditions add further pressure.
Figure 6
Even gold has become an ATM for liquidity-strapped investors. Its sharp declines alongside Bitcoin reflect forced liquidation and the demand for cash, not a change in its long-term monetary role. (Figure 6, upper chart)
The core is now under pressure. This week’s AI dumpfest hit the Nasdaq Composite with a 2.0% weekly loss, its third consecutive weekly decline, and a 7.04% slide over three weeks. Friday’s 2.9% drop was its largest one-day percentage decline since June 5, following disappointing results from Intel and Amazon.
Meanwhile, hyperscalers are financing build-outs in debt markets, adding leverage to an already capital-intensive cycle. AI off balance sheet commitments hits $4.1 trillion: Up 1 trillion in 90 days. (Figure 6, lower graph)
When the cost of capital rises, the expected returns on long-duration investments become harder to justify. What starts as an equity repricing can migrate into corporate credit, debt servicing, and investment spending.
The danger is contagion: falling asset prices, tighter financing, forced deleveraging, and contracting credit. A global recession is the risk embedded in this process, and a broader debt crisis is becoming highly probable.
The periphery is not insulated from the core, and the core is not immune to the financing constraints already visible at the periphery.
VIII. Conclusion: October’s Cost of Suppressing Adjustment
Free lunch politics is NEVER FREE.
The PSEi is held up by the five biggest market caps, a persistent concentrated broker bid and a stabilizing agent for GCASH.
The peso crawls to records while the BSP burns reserves and the President says don’t panic.
Yields rise from the one-year tenor outward to multi-year highs.
The motive behind each intervention is the same: to show stability before the financing gap is closed. The policy is price support, administered relief and reserve burn. The effect is that pressure moves to the next price. Postponement has a cost, and the cost compounds.
Almost everyone has been programmed to believe that spending drives the economy. Spending is the visible half. Before anyone can spend, someone has to have made something others want: a harvest, a service, a product, an export. A fisherman buys rice with the fish he sold. Money is the claim ticket, and the claim is worth only what stands behind it. What you can buy is set by what you or others produced. Or imagine booking a vacation at a resort on the Moon. There may be demand, but there is no supply.
So printed money, borrowed money and extended credit can raise spending today. They cannot create the rice, or the dollars, that the spending needs to meet. They only change who gets the existing output and push the bill onto future output.
That is why the pressure shows up where it does. Dollars come from selling something to the world. Savings come from producing more than you consume. When spending commitments outrun both, the gap appears as a record BOP deficit, a weaker peso and higher yields, because savings are scarce and the state is bidding for them.
A stock, a peso and a bond are all claims on real output and real savings. A floor can hold a quote, but it cannot create the output behind the claim. Indices, GDP and gross savings add up claims into one number and hide who actually produces and who just holds paper. That is the difference between accounting stability and economic resilience.
The three markets are not telling three different stories. In October, they converged on one signal: the growing cost of suppressing adjustment. Support the PSEi and the pressure shows up in the peso. Lean on the peso and it shows up in the bond curve.
Close one valve in
a system under rising pressure and the pressure does not disappear. It finds
the weakest seam. In October, the seams were the PSE’s market internals,
the peso and the bond curve.
The next one may not be in Philippines’ hands at all. Global liquidity is draining, and the pressure is now being fed from outside.
