Corruption Scandal Is Tanking Investor Confidence: Unicapital Slashes PSEi Forecast to 6,800 as Infra Spending Collapses for 5th Straight Month
The flood control corruption scandal isn't just a political problem — it's now hitting the stock market. Unicapital Securities has slashed its year-end PSEi forecast from 7,100 to 6,800, citing slower infrastructure spending and the ongoing corruption investigation as the primary drags on investor sentiment.
The numbers are alarming: government infrastructure spending dropped 45.2 percent in November alone — that's the fifth consecutive monthly decline. The corruption probe into flood control projects has effectively frozen public works implementation, with agencies scrambling to audit existing projects before approving new ones. That fiscal paralysis is dragging down GDP growth expectations.
Unicapital Research Head Wendy Estacio-Cruz explained that the revised target assumes 10 percent earnings growth for listed companies, with stock valuations compressed to around 10.5 times earnings from 12 times previously. "The factors that really dragged it were, number one, the corruption scandal. We still think that infrastructure spending will take time to recover," she said during a Tuesday briefing.
Beyond corruption, Unicapital cited two other headwinds: the BSP's expected pause in rate cuts after the most recent 25-basis-point reduction (they expect another cut only later in the year), and uncertainty around US tax policy and pension fund sustainability. The BSP has already cut rates by a total of 225 basis points in the current easing cycle, bringing the key rate to a three-year low of 4.25 percent.
Despite the downgrade, Unicapital isn't totally bearish. Their strategy is "defensive yet opportunistic" — prioritizing companies with strong balance sheets while selectively targeting structural growth sectors. Estacio-Cruz noted that increased transparency and auditing of government projects should eventually restore confidence. Pero for now, the market is paying the price for the government's corruption hangover.
Source: BusinessWorld Online
