Don’t give up on the PSE
The Philippine Stock Exchange (PSE) has, over the years, been both an exciting and sometimes challenging investment arena. The PSE Index is at about 6,100, a far cry from its peak of over 9,000 in early 2018. For some, the market volatility and the many external factors can be daunting, if not outrightly scary. However, there are compelling reasons why investors should not give up on the PSE. This post explores the resilience of the PSE and why it remains a valuable investment opportunity.
A growing economy
The Philippines is one of the growing economies in Asia. With a young and dynamic population, the country can still attract significant foreign investment, fostering economic growth. The government has been actively promoting business-friendly policies and infrastructure development. These factors should create a conducive environment for businesses to thrive and for the stock market to prosper.
Diverse investment opportunities
The PSE offers a wide range of investment opportunities, from blue-chip stocks to smaller companies in various sectors such as banking, real estate, consumer goods and technology. This diversity allows investors to create well-balanced portfolios to suit their financial goals and risk tolerance.
Attractive valuations
Despite periods of volatility, many Philippine stocks are often considered undervalued by global standards. This presents an opportunity for investors to acquire shares in promising companies at a relatively lower cost, potentially leading to substantial returns in the long run. At current prices, many companies listed on the PSE are now considered cheap.
Dividend yields
Dividend-paying stocks in the Philippines have long been a popular choice for investors seeking regular income streams. Many companies in the PSE distribute generous dividends, providing investors with a steady source of income, even in volatile market conditions. Some companies continue to offer attractive dividends despite the current global economic challenges.
Resilience in the face of adversity
The Philippine stock market has demonstrated remarkable resilience in the face of various challenges, including economic downturns and natural disasters. During the global financial crisis in 2008, the PSE weathered the storm more successfully than many other markets, making a strong recovery in the years that followed. The ability to bounce back from adversity is a characteristic that has attracted both domestic and foreign investors. Hopefully, the PSE will begin to thrive again after the ravages of the pandemic, as evidenced by the continued profitability of listed companies.
Potential for high growth
While the Philippine stock market is considered risky, it offers significant growth potential. The country’s potential for robust economic performance and a growing middle class are key drivers of this growth. As the economy continues to expand, many companies listed on the PSE are poised to benefit, which can translate to higher stock prices and dividends.
Government initiatives
The government of the Philippines recognizes the importance of a vibrant stock market for the country’s economic development. Various initiatives and regulations have been put in place to attract both local and foreign investors. Tax incentives and easier access for foreign investors are some of the strategies implemented to boost market participation.
Investment in infrastructure
Infrastructure development plays a crucial role in economic growth. The government’s commitment to upgrading infrastructure across the Philippines is not only an investment in the country’s future but also a catalyst for economic expansion. This boost in infrastructure spending has the potential to benefit many sectors listed on the PSE.
Global integration
The PSE continues to integrate with global financial markets, attracting foreign investment and expanding its international footprint. The inclusion of Philippine stocks in global indices increases the country’s visibility among global investors, creating more opportunities for investment.
Expertise and support
The Philippine stock market is supported by a robust financial ecosystem. Skilled professionals, such as brokers and analysts, are available to help investors make informed decisions. Moreover, investors can access extensive market research and analysis, aiding their investment strategies.
Long-term perspective
Successful investors often take a long-term view of their investments, and the PSE is an ideal platform for such an approach. Over the years, the market has provided substantial returns to those who have held onto their investments through market cycles, including bear markets. Patience and a commitment to a long-term perspective can be rewarded in the Philippines. While the PSEi is down from its peak of 9,000 five years ago, let’s not forget that 20 years ago, it was only at about 1,200.
Diversification benefits
Investing in the PSE can be a valuable component of a diversified investment portfolio. Diversification is a proven strategy for managing risk and enhancing returns. By including Philippine stocks in a diversified portfolio, investors can spread their risk and reduce the impact of downturns in other markets.
While the PSE may present its share of challenges and uncertainties, it remains a resilient and promising investment opportunity. The country’s growing economy, diverse investment options, attractive valuations and government support make it an appealing destination for investors. Furthermore, its demonstrated resilience in the face of adversity and its potential for high growth underline the reasons not to give up on the PSE.
As a wise investor, you should consider the Philippines as a part of your diversified investment strategy, especially if you are looking for long-term growth and income. With the right research, planning and a patient outlook, the PSE can offer rewarding returns and a piece of the dynamic and ever-evolving Asian economy. So, don’t give up on the PSE; instead, explore the opportunities it offers and consider it as part of your investment portfolio.
Just a friendly reminder, never invest in something you do not understand. It’s best to start investing in stock market education first before investing. And in the case of equity investing, it is best to think long-term. INQ
Randell Tiongson is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 105th RFP program this Jan. 2024. To inquire, e-mail [email protected] or text 0917-6248110.
