The research heads of local stock brokers Abacus Securities Corporation and COL Financial have slashed their year-end forecasts for the Philippine Stock Exchange’s benchmark index because foreign investors (hot money and direct investments) continue to stay away, while corporate earnings growth has not been as strong as expected.

In his mid-year market outlook briefing, Abacus Head of Research Nicky Franco downgraded his year-end 2025 target for the PSEi by 19 percent to 6,900 from his 8,500 fair value target 8,500 at the start of 2025.

On the other hand, COL Chief Equity Strategist April Tan said during a separate mid-year briefing that “We are cutting our end-2025 PSEi index target (by five percent) to 7,700 from 8,100.”

She said that, “during the start of the year, we came out with a scenario analysis and I pegged my target at 8,100 because I expected a re-rating of the market, because FDIs (foreign direct investments were coming. Unfortunately, we did not see that.”

Tan said there were huge expectations that the Corporate Recovery and Tax Incentives for Enterprises Law would lead to the entry of P4 trillion in FDIs.

“But, instead of seeing that come in, we actually saw FDI going down by 41.1 percent which is definitely disappointing because this could have created more jobs which, in turn would have boosted consumer spending,” she noted.

Tan also noted that uncertainty due to Trump’s changing policies has resulted in businesses being “a little bit gun shy when it comes to expanding and hiring more people” because these policies still has an impact on the Philippines even if it is supposed to be relatively isolated.

Other than FDIs, Franco noted that, US President Donald Trump's influence on the markets, causing uncertainty and volatility, has served to push foreign investors (hot money) away from the Philippine stock market.

He added that, “this will keep the PSEI's valuations near historic lows. Earnings, meanwhile, this year, will probably remain tepid, so we have downgraded our 2025 year-end PSEi target.”

Franco explained that “Trump, despite being in office just five and a half months, has had a huge role in shaping financial markets now. He has been touching everything. His impact has been everywhere, from tariffs and trade to fiscal and monetary policy, oil and renewable energy, and so on and so forth.

“Now, this is likely to be the case over the remainder of his term, which will be for another three and a half years. So investors, in our view, will have to live with the volatility and uncertainty going forward.”

The lack of foreign inflows has been driving the PSEI's discount versus emerging markets and he said that, “without the return of hot money, we don't think that foreign investors will return to the Philippines soon, without hot money, the PSEI is going to be dependent on earnings growth moving forward, which, unfortunately, is also in the doldrums.”

Franco also pointed out that the consensus earnings per share (EPS) for the stocks in the PSEi basket has dropped five percent, making it one of the worst years since at least 2007 (excluding the pandemic year 2020).

He also noted that, “the first quarter weighted average EPS growth was quite tepid at less than seven percent year-on-year and it was even slower for the non-index universe at less than five percent. Actually, if you remove DigiPlus from the calculations, for the non-index universe, the year-on-year growth for the non-indexed universe will be negative two percent.”