The stock market’s performance during the first year of Marcos

MANILA, Philippines — Since Ferdinand “Bongbong” Marcos Jr. was declared president of the Philippines on June 30 last year, the Philippine Stock Exchange index (PSEi) has increased by around 5 percent.

While analysts and investors were initially lukewarm to the prospect of a Marcos presidency, the market has remained resilient as he has done some good things for the economy so far.

For example, he appointed highly respected and capable economic leaders and cabinet members.

Just recently, he appointed Dr. Eli Remolona as the new Bangko Sentral ng Pilipinas (BSP) governor. Remolona is highly qualified to lead the central bank given his educational background and his job experience; he worked at the United States Federal Reserve for 14 years and at the Bank for International Settlements for 19 years.

The President also visited several countries and met their heads of state and business leaders to market the Philippines as an attractive investment destination. This has allowed him to gather sizeable investment pledges amounting to around $67.6 billion.

Mr. Marcos also ratified the Regional Comprehensive Economic Partnership Agreement, which is expected to encourage more free trade and make the country an even more attractive investment destination.

Foreign investors are also now allowed to own up to 100 percent of renewable energy projects, which should help the country address the tight power supply situation and increase the share of renewable energy sources.

He inherited a healthy economy that performed well during his first year in office. This was partially due to the economy’s reopening from pandemic-induced lockdowns.

The gross domestic product (GDP) grew by a much faster than expected pace of 7.6 percent in 2022 and 6.4 percent during the first quarter. And although inflation jumped to as high as 8.7 percent in January this year, the number has been trending lower due to falling commodity prices globally and the BSP’s aggressive rate hikes since the middle of 2022.

Not all is perfect, however. While the stock market is up slightly compared to the same period last year, investor interest has been diminishing.

For example, foreign investors have been consistent net sellers in the market, liquidating around P53 billion worth of stocks in the past 12 months. Average daily value turnover has also shrunk to only P5.5 billion for the year-to-date period from P8.5 billion 18 months before “BBM” was declared president.

Capital raising activities have also been very limited, with only three initial public offerings (IPOs) since his term began. The total amount raised by the three issuers is also very small at only P5.1 billion. This makes the past 12 months among the weakest periods in terms of capital raising.

Investors’ lackluster response to the new administration might be due to concerns regarding the sustainability of the country’s strong economic recovery.

For example, although inflation is trending lower, nothing much has been done to permanently address the problems facing the agricultural sector. Food prices are still vulnerable to weather disturbances and to rising global commodity prices as we import much of our food and as tariffs on imported agricultural products remain very high.

Moreover, foreign direct investments were still down by 19.6 percent to $2 billion during the first quarter despite the President’s numerous foreign visits and large investment pledges.

Admittedly, investors’ waning interest in the Philippines is also attributable to global risk factors such as Fed rate hikes and the potential for the US economy to enter a recession and for their stocks to go down sharply.

Unfortunately, neither is there anything exciting happening domestically for foreign investors to prioritize increasing their allocation in the local stock market.

Hopefully, Marcos and his team will implement more reforms in the remaining five years of his term, such that investor interest in the Philippine economy and the stock market will return.