Unicapital lowers PSEi year-end forecast to 6,800 on slower infrastructure spending and corruption

LOCAL brokerage Unicapital Securities, Inc. has lowered its year-end forecast for the Philippine Stock Exchange index (PSEi) to 6,800 from 7,100, citing slower infrastructure spending and a corruption scandal.

Research Head Wendy B. Estacio-Cruz said during a briefing on Tuesday that the PSEi target was lowered because the forecast assumes 10% growth in the earnings of listed companies, while stock valuations have fallen to around 10.5 times earnings from the previous 12 times.

“The factors that really dragged it were, number one, the corruption scandal. So, we still think that this infrastructure spending will take time to recover and probably might see some impact on the second half of the year,” she said.

Philippine government spending on infrastructure fell for a fifth straight month in November, highlighting how a widening corruption investigation has weighed on public works implementation and fiscal momentum.

State disbursements for infrastructure and other capital outlays dropped 45.2% to P48 billion from a year earlier, according to data released by the Department of Budget and Management (DBM) on Jan. 31. Spending also declined 27.2% from October.

“The next one is monetary policy. We’re seeing a pause after the 25 basis points (bps), but that’s our house view,” Ms. Cruz noted. “We’re seeing a pause for at least two more meetings, and probably we’ll see another 25 bps fade away in the latter part of the year.”

“And then last is the longevity of pensions and US taxes,” she added.

Despite this, Unicapital Securities maintained an optimistic outlook on the market’s resilience and gradual recovery.

“Our strategy for 2026 is defensive yet opportunistic,” Ms. Cruz said. “We are prioritizing balance sheet strength and earnings visibility while maintaining selective exposure to structural growth themes. This allows investors to remain resilient while participating in the country’s medium-term recovery.”

Ms. Cruz noted that despite recent moderate growth, the country’s macroeconomic foundation remains solid, entering 2026 with fiscal support and measured monetary accommodation to bolster domestic demand.

“So for this year, we’re expecting the PSEi to re-rate to 10.5x price-to-earnings and that translates to around 6,800, assuming 10% growth in earnings per share (EPS),” she said.

Ms. Cruz added that further Bangko Sentral ng Pilipinas (BSP) policy rate cuts anticipated in 2026 should spur earnings growth by reducing funding costs and bolstering household spending, particularly in consumer-facing and interest-rate-sensitive sectors.

“So there is a lot of transparency and monitoring as well as some auditing for this year in order to make sure that the funds are really allocated to or designated to the government’s projects. So, aside from the infrastructure spending, we think that monetary policy of the BSP will be the key driver or catalyst for our economic recovery,” she said.

The BSP’s policy-setting Monetary Board slashed benchmark borrowing costs by 25 bps for a sixth straight meeting, bringing its key rate to an over three-year low of 4.25%.

It has now reduced interest rates by a total of 225 bps since the easing cycle began in August 2024.

BSP Governor Eli M. Remolona, Jr. said in his earlier statement that future easing will largely depend on how quickly confidence recovers, as weak sentiment has affected demand and widened the output gap.

“We’re now in a situation where it’s more conditional on what happens to confidence and growth,” he said in a briefing.

Unicapital Securities forecasts 5.2% gross domestic product growth in 2026, driven by resumed public infrastructure spending, improved policy execution, and governance reforms aimed at restoring investor confidence.

Key downside risks remain, including a sustained high-interest-rate environment and escalating geopolitical tensions, which could dampen investor risk appetite and disrupt global trade and supply chains, according to Unicapital Securities.

Ms. Cruz said that greater policy clarity and consistent execution will be essential for sustaining market confidence in 2026.

She noted that with infrastructure momentum returning and macroeconomic conditions stabilizing, the Philippines is well-positioned to strengthen its fundamentals and support the next phase of long-term growth.

On Tuesday, the main PSE index rose 0.91% or 59.47 points to 6,547.98, while the broader all shares index went up 0.63% or 22.86 points to 3,614.47. — Alexandria Grace C. Magno