Confidence before capital

The Philippine Stock Exchange index (PSEi) has declined by 17% over the past decade, even as the economy expanded and corporate profits grew and as our Asia-Pacific peers grew by around 70%. At around 6,200-6,800 in late 2025, the index remains below its 2018 peak of over 9,000 points. Meanwhile, Philippine equities trade at roughly nine times earnings, far below the historical average of fifteen and well under the regional average of thirteen to fourteen. This discount reflects weak confidence in future earnings, not weak fundamentals.

While policymakers often talk about increasing listings, enhancing infrastructure, or introducing new investment products, these supply-side measures miss the root cause: a shortage of investor demand. Companies will list only if investors are willing to buy, and investors will buy only if they believe the market is fair, liquid, and well-regulated.

Recent data underscore this imbalance. The Philippines has only about 2.8 million stock market accounts, compared with 16 million crypto users and over 40 million online gaming accounts. As Ron Acoba of Trading Edge observed, more Filipinos are comfortable with the risk and reward of gambling or crypto speculation than with long-term equity investing. This is a symptom of distrust.

Investor confidence is influenced not only by company disclosures and accounting standards but also by the broader country’s governance. In fact, foreign investors will analyze if they want to invest in the Philippines before they look at which sectors or companies they should invest in. Over the past decade, policy unpredictability, corruption scandals, and weak enforcement have consistently undermined public trust in the system. For both domestic and foreign investors, this uncertainty directly leads to higher risk premiums and lower valuations, or, worse yet, capital flight.

Other ASEAN markets have taken a different approach. Vietnam surged ahead by combining stable macroeconomic management with credible regulatory reforms. Clear tax rules, consistent monetary policy, and stronger investor protections helped Vietnam’s benchmark index rise by more than 80%t over 10 years. Indonesia has also strengthened its market by emphasizing fiscal stability and policy consistency, giving investors confidence.

In the Philippines, by contrast, governance concerns weigh heavily on sentiment. The recurring headlines on ghost projects, procurement anomalies, and misuse of public funds create an atmosphere of cynicism. This is the reason many analysts are pointing to for the market’s sluggishness. When investors see little accountability in government, they price Philippine risk higher and demand steeper discounts before investing because ultimately markets are priced based on trust.

It is not surprising that the Philippine market’s daily trading volume averages barely P5 billion, a fraction of Indonesia’s P40 billion or Thailand’s P30 billion. Liquidity has dried up because investors hesitate to commit long-term capital. This is in the context of Philippine companies continuing to innovate and expand, providing vital inputs to the growth of our economy.

Confidence must come before capital to break this cycle. The first step toward reviving the capital market lies in restoring trust in institutions. That means credible, independent enforcement of laws; consistent economic policy; transparent budgeting; and the visible punishment of corruption. Each reform that strengthens public governance sends a powerful signal to the market.

Once confidence is rebuilt, demand will follow. Investors will return. Liquidity will deepen, valuations will improve, and more firms will be encouraged to list. This, in turn, will improve Filipinos’ ability to save and Philippine companies’ ability to raise funds, contributing to further employment and investment. But this will not happen until the country confronts its governance deficit. Confidence, not capital, is our scarcest resource and restoring it requires moral leadership from both government and business. The time to act is now, to rebuild the foundations of trust on which a stronger, fairer and more prosperous market can stand.

The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX.

EJ Qua Hiansen is the chief financial officer of PHINMA Corp. and the president of the Financial Executives Institute of the Philippines.