Is a US-Centric Portfolio Still Optimal—or Is It Time to Position for a Philippine Rebound? This question led me to analyze historical valuation troughs in the Philippine equity market to assess potential upside going into 2026. This is a longer post than usual, but the discussion is important for portfolio positioning—particularly given the elevated valuations of the S&P 500 and the historically discounted multiples at which the PSE is currently trading.

Valuation Dislocation and Structural Opportunities in the Philippine Equity Market: A Multi-Decade Analysis of Fundamental Divergence

1. Executive Summary: The Anatomy of Market Compression

The Philippine Stock Exchange (PSE) currently stands at a pivotal juncture of valuation dislocation, characterized by a profound decoupling of equity prices from fundamental earnings power. As of late 2025, the broader market index and its key constituents are trading at valuation multiples that rival the depths of the 2008 Global Financial Crisis and the political uncertainties of the late 1990s. This report provides an exhaustive, forensic evaluation of notable PSE stocks, utilizing East West Banking Corporation (EW) as a primary case study for the sector-wide compression, while extending the analysis to major conglomerates, consumer staples, utilities, and property developers. The prevailing theme across this analysis is the “numerator-driven” contraction of Price-to-Earnings (P/E) ratios—a phenomenon where corporate profitability (the denominator) has recovered or reached record highs post-pandemic, while equity prices (the numerator) have remained stagnant or regressed due to foreign fund outflows, high interest rates, and localized regulatory risks.

The aggregate market P/E ratio, hovering near 10.1x as of late 2025 ¹, masks significant sectoral variances. We observe a bifurcation in the banking sector where “Tier 2” banks like East West Bank trade at distressed multiples of ~3.1x, a stark deviation from their historical averages and the valuations of their “Tier 1” peers.² Similarly, the conglomerate sector exhibits a deepening “conglomerate discount,” with blue-chip names like Alliance Global Group and LT Group trading at multiples between 2.7x and 4.3x ⁴, implying that the market is assigning negligible or negative value to vast swathes of their operational portfolios.

This report distinguishes between “value traps”—where low multiples correctly signal structural impairment—and “deep value” opportunities where the market has inefficiently priced durable cash flows. Through a historical lens, we compare the current landscape to the 1997 Asian Financial Crisis peak of 28.2x, the 2008 trough of ~9.2x, and the artificial earnings-driven peak of 26.3x in 2021.¹ The analysis reveals that the current compression is distinct in its nature: unlike 2020-2021, where high multiples were driven by collapsed earnings, the 2025 low multiples exist despite robust corporate health, suggesting a historic entry point for long-term capital.

2. Macroeconomic Context and the Historical Valuation Cycle

To evaluate individual equities like East West Bank or Ayala Corporation properly, one must first situate them within the broader oscillating valuation cycles of the Philippine market. The historical data suggests that the PSEi does not mean-revert quickly but rather undergoes long periods of valuation expansion followed by sharp, extended contractions.

2.1 The Four Epochs of Valuation

The trajectory of the Philippine market can be categorized into four distinct valuation epochs, each defined by a specific interplay of earnings growth and investor sentiment.

• The “Asian Miracle” Exuberance (1994–1997):

Prior to the Asian Financial Crisis, the Philippine market experienced a period of extreme optimism. In January 1997, the PSEi P/E ratio reached an all-time high of 28.21x.1 This period was characterized by rapid credit expansion and speculative capital flows. The subsequent crash saw valuations compress violently, hitting a record low of 8.81x by November 1997.1 This historical datum serves as a critical baseline: the market’s “floor” valuation during a systemic currency and banking crisis is approximately 8-9x earnings.

• The Global Financial Crisis (2008–2009):

The second major trough occurred during the Global Financial Crisis. In October 2008, the PSEi P/E ratio fell to 9.23x.1 Unlike 1997, the 2008 crisis was external. Philippine banks were relatively insulated from toxic subprime assets, yet the contagion of fear drove valuations down to single digits. By the second quarter of 2009, despite fears of recession, the Philippine economy performed stronger than anticipated, driven by resilient Overseas Filipino Worker (OFW) remittances and fiscal stimulus.6 This period demonstrated that when P/E ratios dip below 10x in the absence of domestic structural failure, they tend to rebound aggressively as sentiment normalizes.

• The Pandemic Distortion (2020–2021):

The COVID-19 pandemic introduced a unique valuation anomaly. In May 2021, the market P/E surged to 26.28x.1 This was not a bull market signal but a mathematical distortion. As lockdowns decimated corporate earnings (the ‘E’), the P/E ratio spiked even as prices remained depressed. For example, SM Investments saw its P/E peak at 47.3x in 2020 due to earnings contraction, before normalizing to ~13-14x by 2023-2024 as profits recovered.7 Investors relying solely on P/E charts without adjusting for this “earnings crater” would have misread the market as expensive when it was actually fundamentally weak.

• The Post-Pandemic Compression (2024–2025):

The current epoch is defined by high earnings yields and low prices. As of late 2025, the market trades at ~10.1x P/E.1 This compression occurs amidst a backdrop of high interest rates, which raises the cost of equity and depresses the present value of future cash flows. However, unlike 2020, corporate balance sheets are robust. Banks like Metrobank are reporting record earnings 8, and conglomerates like JG Summit have swung back to profitability.9 The disconnect between this operational recovery and stock price stagnation forms the core thesis of this report: the market is pricing in a recessionary scenario that contradicts the reported financial results.

2.2 Sectoral Divergence and the “Fear Discount”

While the aggregate market appears undervalued, the dispersion of valuations reveals specific investor biases. The “Financials” sector trades at an average of 5.4x to 9.8x earnings ¹⁰, significantly below historical norms. This “fear discount” likely stems from investor apprehension regarding the lag effect of high interest rates on non-performing loans (NPLs), particularly in the consumer segment. Conversely, the “Industrial” sector maintains a higher average valuation, though specific constituents like ACEN Corporation distort this with high growth-based multiples.¹¹

The following table illustrates the current valuation landscape across key sectors compared to recent historical averages:

Sector / Industry	Current P/E (approx.)	Historical Context	Primary Driver of Valuation
Financials (Banks)	5.4x – 9.8x	Below 5Y/10Y Avg	Net Interest Margin expansion vs. Credit Risk fears.
Holding Firms	7.0x – 13.0x	Significant Discount	Widening conglomerate discount; foreign outflow.
Property	10.0x – 14.0x	Multi-year Lows	High mortgage rates; POGO exodus impact.
Consumer Staples	11.0x – 20.0x	De-rated from 30x+	Input cost inflation; margin compression.
Utilities/Energy	8.0x – 13.0x	Stable/Defensive	Regulatory risk premium (post-2019 water crisis).

This sectoral view sets the stage for a detailed examination of specific equities, beginning with the banking sector’s most glaring valuation anomaly.

3. Banking Sector Analysis: The Divergence of Quality and Value

The Philippine banking sector offers the clearest evidence of the market’s current inefficiency. While the sector as a whole benefits from high interest rates expanding Net Interest Margins (NIMs), investors have aggressively bifurcated the market, paying premiums for perceived “quality” (BPI, BDO) while punishing “growth” and “consumer” plays (East West, Security Bank) with valuations that imply severe distress.

3.1 East West Banking Corporation (EW): A Case Study in Deep Value

East West Banking Corporation (EW) represents the epicenter of valuation compression. As of late 2025, the stock trades at a Price-to-Earnings ratio of approximately 3.1x.² To put this in perspective, the broader financial sector trades at 5.4x, and the Asian banks industry average is 9.8x.²

Historical Valuation Arc:

EW’s valuation journey tells a story of shifting market narratives. The bank went public in 2012 with an IPO price of P18.50/share, valuing it at approximately 1.12x its expected book value.14 At that time, the market was willing to pay a premium for EW’s aggressive entry into the high-margin consumer lending space. Throughout the mid-2010s, EW maintained valuations consistent with a growth stock.

However, the de-rating has been severe. From a P/E of 12.8x in 2013 and 14.4x in 2017 15, the multiple collapsed to 5.6x in 2023 and further to the current 3.1x level.

Price-to-Book Dislocation:

Perhaps more telling is the Price-to-Book (P/B) ratio. EW currently trades at 0.3x P/B.12 In fundamental terms, this implies the market believes that 70% of the bank’s equity is impaired or will be destroyed by future losses. Yet, the bank’s financial reports do not support such a catastrophic view. Net income has recovered, reaching PHP 6.1 billion in 2023 and PHP 7.6 billion in 2024.16 Return on Equity (ROE) has climbed from 7.7% to 10.9% over the same period.16

• Insight: When a bank trades at 0.3x book while generating an 11% ROE, the market is effectively signaling a belief that the stated book value is inaccurate (hidden NPLs) or that earnings are cyclical and about to collapse. However, given EW’s focus on teachers’ loans and auto loans—segments that have historically shown resilience or predictable loss rates—the pricing appears to be an overreaction to general consumer credit fears.

Dividend Yield as a Floor:

At current prices, EW offers a dividend yield in the range of 5.88% to 5.96%.3 This yield provides a tangible “wait-and-see” incentive for investors. In a market where the 10-year bond yield might hover around 6%, an equity offering a similar yield with the potential for 200-300% capital appreciation (if P/B reverts to just 1.0x) presents an asymmetric risk-reward profile.

3.2 Security Bank (SECB): The Fallen Darling

Security Bank serves as a comparative study in how market sentiment can shift rapidly.

• Current Valuation: SECB trades at a P/E of 4.3x.¹³ This is a dramatic fall from its valuation peak in December 2021, where it traded at 16.0x earnings.¹³
• The 2008 Crisis Benchmark: During the 2008 Global Financial Crisis, SECB traded at P/E ratios ranging from roughly 14.3x to 18.8x.¹⁷ It is a remarkable anomaly that the bank is statistically “cheaper” today, in a growing economy, than it was during the worst financial crisis of the modern era.
• Operational Context: SECB has grown earnings at a compound annual rate of 10.8%.¹⁸ The market’s punishment of SECB likely stems from its aggressive provisioning during the pandemic and volatility in its trading gains, which historically constituted a large portion of its income. The compression to 4.3x suggests investors are stripping out volatile trading income and valuing only the core lending business, potentially too harshly.

3.3 The “Flight to Quality” Premium: BPI and BDO

In contrast to EW and SECB, the market leaders exhibit what can be termed a “quality premium,” though they too have suffered de-rating.

• Bank of the Philippine Islands (BPI): BPI trades at a P/E of 9.5x.¹⁹ While significantly higher than EW’s 3.1x, this is still a contraction from its 5-year peak of 19.0x in 2021.¹⁹ BPI’s valuation is anchored by its massive low-cost deposit base (CASA), which widens margins in high-interest environments. The market pays up for this stability.
• BDO Unibank (BDO): The market leader trades at 8.1x P/E.¹⁰ BDO’s valuation peaked at 16.5x in 2020.²⁰ The compression here is less severe than the mid-caps but reflects the general withdrawal of foreign liquidity from the Philippine market.

Synthesis of the Banking Sector:

The divergence between the ~3x P/E of consumer-centric banks and the ~9x P/E of corporate/institutional banks indicates a specific investor aversion to consumer credit risk in the current inflationary environment. However, historical data shows that consumer banks often lead recoveries. If the economy stabilizes, the “beta” in stocks like EW and SECB could drive significantly higher returns than the stable “alpha” of BPI or BDO.

4. Conglomerates: The Discount Widens to Historic Extremes

Philippine conglomerates, once the darlings of foreign portfolio investors, are experiencing a structural de-rating. The “conglomerate discount”—the gap between the holding company’s market cap and the sum of its parts (SOTP)—has widened to levels that imply the market sees negative value in the parent level management or debt structures.

4.1 Alliance Global Group (AGI): Pricing in Zero Value?

Alliance Global presents one of the most extreme cases of undervaluation in the PSE.

• Valuation: AGI trades at a P/E of roughly 2.7x.⁴ This is statistically the lowest quartile of its historical trading range.
• Component Analysis: AGI owns controlling stakes in Megaworld (Property), Emperador (Liquor), and Golden Arches (McDonald’s Philippines). Emperador alone trades at ~38x P/E ²¹ due to its international exposure. For the parent AGI to trade at 2.7x while a major subsidiary trades at 38x implies that the market is assigning a massive negative value to the other parts or the holding structure itself.
• Historical Context: In 2020, AGI traded at 9.6x P/E.⁴ The collapse to 2.7x suggests a complete loss of investor confidence, possibly linked to concerns over POGO exposure in its property arm or broader governance discounts, yet fundamentals remain profitable with a “Healthy Gross Margin” of 46%.²²

4.2 JG Summit Holdings (JGS): The Turnaround Play

• Valuation: JGS trades at 7.4x P/E.⁹
• Volatility Context: This valuation follows a period of losses (negative P/E) in 2021 and 2022 due to the pandemic’s impact on Cebu Pacific (airline) and JG Summit Olefins (petrochemicals).⁹
• Assessment: The return to 7.4x indicates a recovery, but the market remains hesitant. The historical peak was 56.3x in 2020 (distorted earnings). A normalized valuation for a diversified conglomerate with aviation, food, and property interests would typically be in the 15x-18x range. The current price offers a “turnaround option”—betting that the airline and petrochemical divisions will stabilize.

4.3 Ayala Corporation (AC): The Fallen Blue Chip

• Valuation: Ayala Corp trades at 5.7x P/E.²³
• Historical Anomaly: This is a 5-year low and a massive departure from its 2021 peak of 29.8x.²³ Historically, AC traded at a premium due to its reputation for prudent management and exposure to secular growth themes (telecom, water, banking).
• Drivers: The de-rating reflects skepticism about its newer capital deployments (e.g., in logistics or health) and the dragging effect of high interest rates on its capital-intensive subsidiaries like ACEN and Manila Water, which was just sold to the Razon group.

4.4 SM Investments Corporation (SM)

• Valuation: Trades at 13.1x P/E.⁷
• Relative Strength: SM maintains the highest valuation among conglomerates, reflecting its dominant position in retail and banking. However, even SM is down from its 5-year average of 28.2x.⁷
• Significance: SM is often viewed as a proxy for the Philippine consumer. Its compression from ~28x to ~13x signals that the market has fundamentally lowered its growth expectations for Philippine consumption expenditure.

5. Consumer Staples: From Premium to Value

Consumer staples were historically the “expensive defensive” stocks of the PSE, often trading at 30x-40x earnings. The recent inflation surge has crushed margins, leading to a severe valuation reset.

5.1 Universal Robina Corp (URC)

• Valuation: Current P/E is 11.0x.²⁴
• Historical Contrast: URC averaged 23.3x over the last five fiscal years.²⁴
• Insight: The stock is trading at less than half its historical average valuation. This is a classic “margin compression” story. As input costs (sugar, flour, fuel) rose, margins shrank. However, as commodity prices stabilize, URC’s earnings power is likely to rebound. Buying a market leader at 11x earnings when it historically commands 23x represents a significant “margin of safety.”

5.2 Jollibee Foods Corp (JFC)

• Valuation: Trades at 21.3x P/E.²⁵
• Resilience: JFC has de-rated from its 2021 peak of 50.7x ²⁵ but remains expensive relative to the market (10x). This “Jollibee Premium” persists due to its global expansion story (Smashburger, Coffee Bean). However, the drop to ~20x brings it closer to global fast-food peers, making it more attractive to international investors than when it traded at 40x.

5.3 Monde Nissin (MONDE)

• Valuation Complexity: MONDE shows a negative P/E of -398x due to massive non-cash impairment losses related to its Quorn business.²⁶
• Analysis: This headline number is misleading. The core Asia-Pacific food business remains highly profitable and cash-generative. Investors must look at “Core Net Income” or EBITDA multiples here. The statutory loss obscures the value of the Lucky Me! noodle franchise, which is a staple in Philippine households.

6. Utilities and Infrastructure: Regulatory Shadows and Cyclicality

The utilities sector is haunted by the ghosts of 2019, where regulatory intervention caused massive value destruction.

6.1 Manila Water (MWC) and the 2019 Crisis

• Valuation: Currently trades at 9.3x P/E.²⁷
• The 2019 Crash: In December 2019, MWC shares plummeted to a record low of P5.00/share, trading at a P/B of 0.5x.²⁸ This was triggered by the government’s threat to cancel concession agreements due to “onerous provisions.”
• Recovery and Scarring: While the stock has recovered from P5.00, it has not regained its pre-2019 premium valuations. The market now prices in a permanent “regulatory risk premium,” capping the upside for both MWC and Maynilad’s parent (DMCI/MPI).

6.2 Semirara Mining (SCC)

• Valuation: Trades at 8.6x P/E.³⁰
• Cyclicality: SCC hit a low P/E of 3.5x in 2022.³⁰ This occurred because coal prices spiked (driving the denominator ‘E’ up massively), but ESG concerns kept the price (numerator) suppressed. SCC remains a yield play; investors buy it for dividends rather than multiple expansion.

6.3 ACEN Corporation (ACEN)

• Valuation: Trades at extremely high multiples (100x+) or negative P/E depending on the quarter.¹¹
• Growth Story: ACEN is the exception to the low-valuation rule. The market prices it on future capacity (Gigawatts of renewable energy) rather than current earnings. It represents the market’s willingness to pay up for the “Energy Transition” narrative, contrasting sharply with the dismissal of “old economy” stocks like SCC.

7. Property: The Interest Rate Headwind

7.1 SM Prime (SMPH) and Ayala Land (ALI)

• SMPH: Trades at 13.6x P/E, a steep drop from its 5-year average of 34.7x.³¹
• ALI: Trades at 10.9x P/E, compared to a 5-year peak of 49.5x.³²
• The Mechanism: High interest rates have a dual negative effect on property developers: they increase the cost of debt for the developers and increase mortgage rates for buyers, dampening demand. Additionally, the exodus of POGOs (Philippine Offshore Gaming Operators) has left a vacancy overhang in the commercial office sector. The compression of SMPH and ALI multiples from 30x-40x down to 10x-13x reflects the market pricing in a “higher-for-longer” rate environment.

8. Telecommunications: Yield over Growth

8.1 PLDT (TEL) and Globe (GLO)

• PLDT: Trades at 9.6x P/E.³³
• Globe: Trades at 11.8x P/E.³⁴
• Analysis: Both telcos have settled into a “utility-like” valuation phase. With high capex requirements (5G rollout) and saturated subscriber bases, they are no longer viewed as growth stocks. Instead, investors focus on their dividend yields. PLDT’s valuation hit a low of 8.1x in 2022 ³³, coinciding with its capex overrun scandal.

8.2 Converge ICT (CNVRG)

• Valuation: Trades at 9.5x P/E.³⁵
• IPO Context: CNVRG IPO’d at P16.80/share in 2020, implying a much higher multiple based on its growth trajectory then.³⁶
• Transition: The drop to 9.5x signals a transition from “hyper-growth” to “mature growth.” At single-digit P/E, CNVRG is now priced similarly to the legacy telcos (TEL/GLO), which arguably undervalues its superior growth profile in the fixed broadband space.

9. Conclusion: A Strategic Menu for Investors

In summary, the analysis of the Philippine equity market reveals a rare confluence of operational recovery and valuation despair. Furthermore, the Philippine market is currently pricing in a severe, permanent contraction in economic activity. If the economy merely muddles through with 5-6% GDP growth, the re-rating of these compressed multiples could drive substantial returns over the medium to long term.

For asset allocators, below is a table showing the all time P/E lows of some PSE-listed equities with additional context.

Ticker	Company	P/E Low (Approx.)	Period	Context of Low	Status
AC	Ayala Corp	9.8x	Dec 2024	High Rates / Conglo Discount	Modern Low
ACEN	ACEN Corp	Distressed (~0x)	1998	Pre-Ayala / Penny Stock Era	Historical
AEV	Aboitiz Equity	7.9x	Dec 2024	Infra Capex Drag	Modern Low
AGI	Alliance Global	2.6x	Dec 2024	Deep Conglo Discount	All-Time Low
ALI	Ayala Land	14.2x	Dec 2024	High Interest Rates	Modern Low
AREIT	AREIT Inc.	16.4x	Dec 2024	Yield Spike	All-Time Low
BDO	BDO Unibank	8.1x	Dec 2024	Resilience vs 2008 GFC	Modern Low
BPI	Bank of the Philippine Islands	9.5x	Dec 2024	2008 GFC Retest	Cycle Low
CBC	Chinabank	5.2x	Dec 2025	Valuation Gap	All-Time Low
CNPF	Century Pacific	16.1x	Dec 2020	Pandemic Defensive	Cycle Low
CNVRG	Converge ICT	9.37x	Dec 2025	Growth to Value Pivot	All-Time Low
DMC	DMCI Holdings	3.5x – 5.1x	2022	Peak Coal Earnings	Cycle Low
EMI	Emperador	21.9x	Dec 2020	Pandemic	Cycle Low
GLO	Globe Telecom	5.55x	Mar 2022	Peak Capex Cycle	All-Time Low
GTCAP	GT Capital	3.4x	Dec 2024	Auto/Bank Discount	All-Time Low
ICT	ICTSI	13.5x	Dec 2022	Global Recession Fear	Modern Low
JFC	Jollibee	-20.8x / 17.9x	2020 / 2009	Pandemic / GFC Recovery	Distress/Profit
JGS	JG Summit	-92.7x / 6.6x	2021 / 2024	Airline Loss / Discount	Distress/Profit
LTG	LT Group	3.2x	Dec 2022	Tobacco Decline	All-Time Low
MBT	Metrobank	5.0x – 6.0x	2002 / 2025	NPL Cleanup / Current	Retesting Low
MER	Meralco	~4.0x	2003	Regulatory Crisis	Historical
MONDE	Monde Nissin	-398x	2024	Quorn Impairment	Distress
PGOLD	Puregold	8.2x	Dec 2023	Slowdown	All-Time Low
PLUS	DigiPlus	5.6x	2024	Earnings Breakout	All-Time Low
SCC	Semirara	3.5x	Dec 2022	Peak Coal Earnings	Cycle Low
SM	SM Investments	13.1x	Dec 2023	Foreign Sell-off	Modern Low
SMC	San Miguel	-68x / 4.6x	2023 / 2024	Forex Loss / Conglo Discount	Distress/Profit
SMPH	SM Prime	16.6x	Dec 2024	Rate Headwinds	Modern Low
TEL	PLDT	-1.5x / 4.1x	2002 / 2008	Restructuring / GFC	Distress/Profit
URC	Universal Robina	15.6x	Dec 2024	Margin Compression	Modern Low

Important Note: The above are not stock picks and this material is for informational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any securities. Views expressed are based on publicly available information and personal analysis. Anotated references available upon request.

— Ben Joseph Evangelista
Financial Strategy Consultant | Portfolio Positioning & Capital Allocation

For questions or discussion on this analysis – bjevangelista@gmail.com