For the local capital market, 2024 was a year of unmet expectations as global economic and geopolitical tensions took bourses worldwide, including the Philippines, on a roller-coaster ride.
The year began with optimism. The Philippine Stock Exchange was projected to end the year at the 7,000 to 7,500 level amid expectations of economic growth, lower inflation, and easing interest rates.
However, this rosy picture soon turned gloomy. Chinabank Capital Corporation Managing Director Juan Paolo Colet said, the first-quarter rally “gave way to a steep selloff as the Federal Reserve delayed its interest rate cutting cycle and geopolitical tensions flared in the Middle East.”
Philstocks Financial Research Manager Japhet Tantiangco added, “Inflation expectations rose due to the upside risks posed by El Nino” which led the Bangko Bangko Sentral ng Pilipinas to also delay its expected rate cuts."
"From its June low, the bourse rallied to its yearly peak as inflation was kept at manageable levels despite lingering upside risks, especially on food prices. In addition, the Fed and the BSP started their monetary policy easing cycle. Satisfactory first-half corporate results and the slight recovery of the peso also helped in the rise," he explained.
However, Colet noted, "The second rally from late June to early October was mostly wiped out by the re-election of Donald J. Trump in the US."
Aside from the prospects of protectionist policies in the US and their global economic implications following Trump's re-election, Tantiangco pointed out that the rally fizzled out due to dismal third-quarter gross domestic product (GDP) performance and the renewed weakening of the peso.
"On the positive side, the highlight of 2024 was when the PSEi hit a new post-pandemic closing high of 7,554.68 on October 7. The expected IPO (initial public offering) revival did not materialize, as only three companies debuted on the PSE, and no 'superstar' IPO pushed through," said Colet.
The PSE reported that the PSEi closed higher year-on-year for the first time since 2019, up by 78.75 points or 1.2 percent to 6,528.79 points from its 2023 close of 6,450.04.
Domestic market capitalization at year-end rose by 11.2 percent to P14.57 trillion, compared with P13.10 trillion in 2023. The total capital raised from primary and secondary shares amounted to P82.37 billion, compared to P140.95 billion raised in the previous year.
Three companies conducted their initial public offerings: OceanaGold (Philippines), Inc., Citicore Renewable Energy Corporation, and NexGen Energy Corp.
"Internal and external economic and geopolitical headwinds weighed on the market for most of the year, prompting IPO listing applicants to defer their public offerings," said PSE President and CEO Ramon S. Monzon.
Colet noted, "The market exceeded our expectations. In the course of the year, it surpassed our base case target of 7,100 and even met our best-case target of 7,500. Thus, investors who bought the index at the start of January and cashed out at those levels were able to post decent returns."
Tantiangco said trading activity improved in 2024, with net value turnover averaging P5.16 billion per day (as of Dec. 26), higher than the preceding year's P4.85 billion. However, this remains anemic compared to the market's pre-pandemic trading volumes.
"This shows that investors have been cautious for most of the year, with some even staying out of the bourse amid lingering risks," he pointed out.
Foreigners were still net sellers with net outflows of P23.18 billion, but this was narrower than last year's P53.65 billion.
"In the end, we go back to the concept that the stock market is a barometer of investors' sentiment towards the economy. The local bourse's sideways movement for the year shows that investors are somewhat hopeful but also skeptical," said Tantiangco.
"The positive side is driven by expectations of manageable inflation and declining interest rates. However, there are also the dismal GDP performance, the weakening of the local currency, and offshore risks, including geopolitical tensions, China's economic slowdown, and the prospects of protectionist policies in the US, that throw shades of doubt over the local economy," he added.
Colet concluded, "It was a bittersweet culmination to a volatile year marked by steep rallies and corrections as hope turned into caution. Just like 2023, this year again turned out to be fairly good for investors who were able to trade in and out of the major market waves."