The Monday Circle: Navigating Philippine Equities In 2025

Last Monday at the Westin Manila’s Seasonal Tastes restaurant, the latest edition of The Monday Circle brought together an eclectic mix of thought leaders and industry professionals.

Mark A. Angeles, First Vice President and Head of Equity Research, painted a cautiously optimistic picture of the year ahead, offering a mix of opportunities and challenges for investors navigating a market poised for recovery. | Photo: GSU

This bi-monthly breakfast roundtable, supported by sponsors like The Financial District, has established itself as a premier forum for discussing the economic and business landscape.

The November 25, 2024, session focused on the outlook for Philippine equities in 2025, with a presentation from First Metro Securities taking center stage.

The session was facilitated by Andoy Beltran, Vice President for Business Development and Market at First Metro Securities. Leading the team’s presentation were Mark A. Angeles, the head of Equity Research, and Estella B. Villamiel, the Department Head for Institutional Research.

Together, they painted a cautiously optimistic picture of the year ahead, offering a mix of opportunities and challenges for investors navigating a market poised for recovery.

The First Metro Securities team emphasized that positioning for an early cycle rally would be key as the business cycle shifts from slowdown to recovery.

Despite global uncertainties, including the specter of potential policy shifts under a Trump 2.0 presidency, they expressed confidence in the resilience of the Philippine market.

This confidence is anchored in strong domestic fundamentals, geopolitical stability, and emerging transformative themes such as AI-driven innovation.

For 2025, the team presented an index target range of 6,600 to 8,600, with a base case estimate of 7,600. This projection rests on a forward price-to-earnings multiple of 11.8x, a 4.30 percent yield on the U.S. 10-year bond, and forward earnings per share of PHP647.71.

While volatility is expected to persist, the narrative of recovery was dominant throughout the discussion.

Within this framework, domestic growth opportunities emerged as a central theme.

Large-cap stocks and sectors such as property, banking, and consumer discretionary are expected to lead the recovery, with notable companies like Ayala Land, BDO Unibank, and Jollibee Foods Corporation identified as potential beneficiaries.

The upcoming 2025 mid-term elections add another layer of optimism, as election-related spending has historically boosted consumption and capital formation.

Consumer-centric businesses, including Puregold Price Club, Robinsons Retail Holdings, and SM Investments, are likely to experience a positive spillover.

Another compelling area of discussion was the rapid adoption of artificial intelligence. AI is set to transform industries with high operating leverage, from banking to telecommunications, by enhancing productivity and cost efficiency.

This technological shift could provide an edge to companies looking to close the gap with industry leaders. Despite the constructive outlook, the team did not shy away from highlighting potential headwinds that could derail recovery efforts.

Weaker-than-expected economic data, such as the recent underperformance of the Philippine economy against consensus estimates, remains a concern.

The recovery process is fraught with vulnerabilities, including household deleveraging, the potential return of inflation, and external shocks that could disrupt the trajectory of growth.

Geopolitical developments also pose a significant risk. Shifts in U.S. policy could have adverse implications for the Philippines, particularly in areas of economic and defense cooperation.

A bill proposed by incoming U.S. Vice President J.D. Vance, which aims to impose a 10 percent tax on remittances, could severely impact the dynamics of the country’s remittance flows—a critical economic pillar.

The Philippines’ vulnerability to climate change introduces another layer of unpredictability.

Climate-related supply shocks could exacerbate inflationary pressures and disrupt economic performance, making this risk a significant concern.

The potential for a sustained rise in U.S. bond yields also looms large. Yields exceeding five percent could lead to another wave of market valuation downgrades and earnings-per-share cuts, triggering foreign fund outflows and amplifying pressure on local markets.

Meanwhile, a persistently weak peso—especially a sustained breach of PHP60 to the U.S. dollar—could undermine consumer and investor confidence.

Global geopolitical conflicts add to the complexity of the situation. Ongoing tensions, such as those between the U.S. and China or Russia and Ukraine, create uncertainties that could reverberate across financial markets.

Additionally, the tight financial conditions of recent quarters have increased the likelihood of disruptive “tail risk” events that could increase the likelihood of a disruptive "clear the deck" scenario.

Amid these challenges, the session reiterated that the Philippine market offers significant opportunities for investors willing to navigate short-term volatility.

The resilience of the domestic economy, coupled with disinflation trends, consumption recovery, and advancements in AI, sets the stage for double-digit earnings growth.

The Monday Circle provided an invaluable platform for these insights, equipping attendees with the tools to approach 2025 with confidence and strategic intent.

For investors ready to tune out the noise and focus on the broader recovery narrative, the horizon looks promising. As the First Metro Securities team aptly summarized, the mantra for the year ahead is clear: "Position early and stay the course."