How will the stock market perform under a Marcos Jr. presidency?

Investors are lukewarm to the prospects of a Ferdinand Marcos Jr. presidency, with Marcos placing only fourth in a survey conducted by Bloomberg among investors and analysts on “who will be the best person to lead the Philippine economy?”

How the stock market will perform though will depend on several factors beyond the popularity of our new president.

Note that the PSEi index ended flat to higher six months after the election of four out of the past five presidents. Moreover, although the stock market fell by almost 23 percent six months after President Estrada was elected in 1998, this was largely due to the Asian Financial Crisis and not his doing.

In the near term, the stock market is not expected to do well regardless of who will lead the country.

This is because of rising inflation caused by higher commodity prices and rising interest rates, which were largely triggered by external factors such as the pandemic, the war in Ukraine and the US Fed’s aggressive monetary tightening policy.

The US market is also not doing well, and this will negatively affect sentiment for stocks globally, including the Philippines.

Admittedly, the economic policies of the new president will have an impact on the stock market’s performance over the longer term.

However, no one really knows what Marcos’ policies will be since he never discussed them in detail during his campaign, which is why many investors and analysts are concerned.

To alleviate worries, Marcos should appoint highly qualified economic managers who are known for their integrity and will be allowed to work independently to address the problems facing the economy.

President Duterte followed a similar setup, and this enabled his administration to pass numerous sound economic policies and the economy to grow rapidly prior to the pandemic.

Despite the numerous challenges facing the new administration, there are also several factors that will make their job easier.

For example, the Philippines is in the middle of a demographic sweet spot, with the size of its productive population expected to grow rapidly until 2055. The country’s attractive demographics make it easier for the economy to grow faster. These also make the country a very lucrative investment destination for many foreign consumer companies.

OFW remittances remain resilient, and already reached $34.9 billion last year. Aside from helping fund consumer spending, this is also a very important recurring source of US dollars for the country.

Finally, several laws were passed under the Duterte administration that will make it easier to attract foreign investments.

These include the CREATE law, which reduced the corporate income tax to a more competitive level of 25 percent, the amendments to the “trade liberalization act,” which reduced the paid-up capital requirements for foreign retail enterprises, and the amendments to the “foreign investment act” and the “public service act,” which paved the way for foreign investors to fully own domestic companies in select industries.

If the Marcos administration does what is right, then the economy and corporate earnings will continue to grow rapidly, allowing the stock market to do well in the next six years. After all, the bar has been set very low for Philippine stocks, with foreign investors largely absent and valuations depressed. INQ