How a scandal broke Philippine investor confidence

A FORMER accountant who invested her savings after being laid off in late 2024 pulled out of the market entirely in early 2026 amid the shakeup seen in last year’s markets.

“It is the realization of how its volatility can ruin your investment in a flash, especially when funds are placed in stocks or balanced equity pools,” said the former multinational bank employee, who requested anonymity.

The Philippine Stock Exchange (PSE) index closed 2025 at 6,052.92 on Dec. 29, down 7.3% or 475.87 points from its end-2024 level of 6,528.79. On Nov. 14, the PSE index plunged to 5,584.35, its weakest close in nearly five and a half years, or since the 5,570.22 close on May 28, 2020.

By comparison, the Standard & Poor’s 500 (S&P 500) index rose by 22.6% to 6,845.49 points by its final trading day on Dec. 31, 2025 from the same day in 2024.

Her experience reflects a broader flight to safety that swept through Philippine wealth management in 2025. The Philippine economy has been through a great upset, since President Ferdinand R. Marcos, Jr. said that about 6,000 flood control projects estimated to be worth P350 billion launched since 2022 were anomalous.

TURMOIL
The flood-control project scandal’s damages were seen not just in poor infrastructure. It dragged the Philippine economy to a 3% growth in the fourth quarter of 2025, the slowest pace since the 3.8% contraction in the first quarter of 2021 during the coronavirus pandemic, data from the Philippine Statistics Authority (PSA) showed.

Full-year growth settled at 4.4%, the weakest in five years outside the pandemic-induced 9.5% contraction in 2020 and missed the government’s 5.5%- 6.5% target.

Approved foreign investments in the Philippines plunged by 50.1% year on year to P272.38 billion in 2025, the sharpest fall in five years, according to the PSA. This was the steepest drop in foreign investments since the 71.3% decline recorded during the pandemic in 2020.

Even the Bangko Sentral ng Pilipinas (BSP) delivered a surprise rate cut in October, slashing by 25 basis points to bring the key rate to 4.75%. The Monetary Board said the outlook for domestic economic growth had weakened, reflecting in part the impact on business confidence of governance concerns about public infrastructure spending.

“Across our businesses, we saw a noticeable shift towards liquidity and flexibility,” Philippine National Bank (PNB) said in an e-mailed response. “Clients whose risk appetite was already tempered by interest rate volatility and geopolitical uncertainty became even more allocation-conscious.”

Joaquin Rossano U. Veluz, a client portfolio manager at Sun Life Investment Management and Trust Co., said investor confidence dropped sharply during the period.

“A lot of investors became quite risk-averse in their choice of investments,” Mr. Veluz said in a Teams video call. “Many are prioritizing money market and short-term, capital preservation-type products.”

About 90% of Sun Life’s assets under management in unit investment trust funds (UITFs) are parked in money market products, Mr. Veluz said. The corruption scandal that erupted in the second half of 2025 prompted many investors to park funds in cash, money market funds, and short-duration bonds.

“Many households chose to park funds in cash, money-market funds and short-duration bonds rather than commit to longer-dated instruments,” PNB added.

The former accountant said the market’s poor performance fundamentally changed her saving habits.

“Instead of putting my money into high-earning stock-equity investments, including insurance products with market exposure, I will consider investing in vacant land/lots and perhaps gold, if feasible,” she said. “These are assets that appreciate over time.”

Not all investors fled, however. An investment banker at a multinational firm who requested anonymity saw opportunity in the downturn, investing in stocks he assessed as undervalued during 2025.

“Now is a good time to purchase companies at a huge discount from intrinsic value,” the investment banker said. “Many companies are even trading at below book value.”

While he was able to beat the market last year — losing just 3% over the 10% crash starting from when he started going long — he said that the blue-chip stocks he bought continue to be undervalued today.

“I bought at the absolute bottom, and then it just stayed there.”

COMMON PITFALLS
Wealth managers identified emotional decision-making as the primary risk facing investors during periods of market stress.

“The greatest risk we observe is emotional decision-making,” PNB said. “Sensational headlines can trigger panic selling or excessive defensiveness, both of which undermine long-term returns.”

Mr. Veluz said the most dangerous mistake he observes among Filipino investors is the absence of clear financial goals.

“When you ask them why they invest, they don’t know,” he said. “Because investing for retirement is entirely different from investing for a goal that’s three to five years away.”

The lack of planning distorts decision-making and leaves investors vulnerable to market swings, he added.

“Not having a plan or a goal distorts your decision-making and leaves you without a clear sense of how to approach investing,” Mr. Veluz said.

Beyond the absence of goals, Mr. Veluz identified two other common mistakes: lack of discipline and susceptibility to investment fads.

“Whatever is trending, everyone wants in,” he said. “Right now, it’s probably gold and tech. Even if, first, your risk profile doesn’t fit that type of investment, and second, if your current portfolio is small, do you really want to allocate a substantial portion to an illiquid instrument?”

The flood control scandal, which involved billions of pesos in alleged corruption, left many investors questioning whether saving made sense at all. The former accountant said she has lost faith in investing in local publicly listed companies entirely.

“There was this relationship manager of a major bank who gave advice never to invest in the local publicly listed companies,” she said.

“It’s quite disheartening, to be honest,” Mr. Veluz said. “But we advise our clients to focus on what they can control — and that is how much they save and where they invest those savings.”

PNB emphasized that consistent contributions compound over time regardless of political or economic turbulence.

“The scandal underscored the importance of anchoring saving on personal goals rather than on circumstances beyond one’s control,” the bank said. “We remind clients that they save and invest to secure their family’s future and their own, not to endorse institutions.”

LOOKING AHEAD
For clients specifically worried about corruption-driven volatility, PNB emphasized the importance of assessments.

“Before recommending specific instruments, we undertake a thorough client suitability assessment of each client’s goals, time horizon, sophistication, and risk tolerance,” the bank said.

For conservative investors, PNB said it emphasizes government securities and investment-grade corporate bonds to provide regular income and principal stability.

“Diversified fixed income funds can further spread risk across sectors and maturities,” the bank added.

When corruption shocks coincide with other economic pressures, the bank advised measured adjustments.

“When corruption-related shocks coincide with inflation, currency weakness or other macroeconomic pressures, the instinct may be to overhaul the entire portfolio,” PNB said. “We counsel against drastic shifts.”

Mr. Veluz said wealth managers are steering clients toward diversified portfolios with increased global exposure.

“Since the local market is affected by corruption and weakened investor confidence, we always advise our clients to take a more holistic, diversified approach to their portfolios,” he said. “Number one: you have to get global exposure.”

He said Filipino investors are beginning to appreciate the need for diversification after the Philippine market’s poor performance relative to global markets in recent years.

“From 2005 to 2015, the Philippine market returned around 18–19%,” he said. “But from 2015 to 2025, that flipped. The Philippine market was flat to negative. The global market was around high double digits.”

Asset managers have responded by rolling out more products that give Filipinos exposure to global funds, increasingly offering them in pesos to reach a wider investor base.

“Before, a lot of these funds were only available in US dollars,” Mr. Veluz said. “Now they’re offering them in peso and through more channels.”

He added that diversifying to offshore markets actually lowers portfolio volatility.

“The S&P 500 companies are actually higher quality than local PSE index (PSEi) names,” Mr. Veluz said. “So by diversifying some of that local exposure, you’re actually lowering your volatility.”

On emergency fund targets, PNB said the traditional benchmark of six to twelve months of essential expenses remains prudent, with the exact target adjusted for job stability and number of dependents.

“There is no universal formula for emergency funds because incomes and spending patterns vary widely,” the bank said. “Nevertheless, rising inflation and market volatility call for deeper liquidity buffers.”

Mr. Veluz said his firm recommends three to six months of monthly income set aside in highly liquid instruments.

“But I think the reality is that Filipino households and investors still want guaranteed-type returns and guaranteed-type products,” he said. “A lot of them are in money market, time deposits, and current account savings accounts.”

The former accountant said she still believes in saving despite current economic conditions, but through more traditional vehicles.

“It may be wiser to place excess funds in more traditional investment vehicles such as money‑market funds, bonds, raw land, or even gold,” she said.

The investment banker took the opposite view.

“I suggest investing instead of saving,” he said. “Again now is a great time to accumulate assets at high discounts to intrinsic value.”

Despite the challenges of 2025, wealth managers see potential for recovery in 2026, provided certain conditions are met.

“The PSEi has a chance to perform well,” Mr. Veluz said. “Why? Because the peso has started to appreciate.”

He said foreign investors may return to bargain hunt given how low valuations have become compared to regional neighbors.

“Whether foreign flows actually return will still depend on how the economy and the country perform,” Mr. Veluz said. “We need to see a swift recovery, or at the very least, a stabilization of gross domestic product.”

The missing link remains government spending and resolution of the corruption issue, he added.

“There needs to be some semblance of accountability — that people will face consequences for this corruption,” Mr. Veluz said. “That would hopefully unlock a virtuous cycle: consumers start spending again, businesses start looking at expansion and hiring, and investors begin to feel that the worst is over.”

The former accountant called for an independent watchdog group outside the control of politicians or big companies that could check, investigate, and stop suspicious activities immediately.

“Violators will then be caught early and not years later when the damage is already done,” she said. “But for it to work, whistleblowers must be fully protected so insiders can safely report wrongdoing without fear of losing their jobs or being harassed.”

The investment banker disagreed on the need for new regulations.

“The laws and rules and regulations are robust enough to prevent scandals and fraud,” he said. “The institutions are strong in a vacuum. But the problem is that the people running them are not incorruptible nor infallible.”

For investors navigating the current environment, both wealth managers emphasized the importance of staying disciplined and maintaining a long-term perspective.

“Long term investors who stay invested through volatility historically fare better than those who jump in and out of markets,” PNB said.

Mr. Veluz said the key message for 2026 is simple.

“They should focus on staying the course and staying diversified,” he said. — Pierce Oel A. Montalvo