MANILA, Philippines – On Monday, February 3, the Philippine Stock Exchange Index (PSEi) welcomed two new members: AREIT and China Banking Corporation (CBC). If you’re new to investing or the stock market, you might be wondering: what is the PSEi exactly, and what role does it play?
The PSEi is essentially the scoreboard of the Philippine stock market. It tracks the performance of the biggest and most actively traded companies on the exchange, offering a snapshot of how the stock market — and, by extension, the economy — is doing.
“The PSEi represents the 30 largest and most actively traded publicly-listed companies on the exchange, serving as a benchmark for the stock market. They are also referred to as ‘Index Stocks’ or ‘Blue Chip Stocks’,” Andoy Beltran, vice president and head of business development and market education at First Metro Securities, told Rappler.
These blue chip stocks — think Ayala Corporation, SM Investments, and San Miguel — are generally regarded as solid investments because they tend to grow steadily over time. Many investors hold onto these stocks for years, banking on their long-term appreciation.
How does a company get into the PSEi?
Not just any company can join the index. Companies must meet strict criteria during the PSE’s regular rebalancing, which happens twice a year (in February and August).
According to Beltran, to qualify for the PSEi, a company must:
- Be among the top in terms of median daily trade value over a review period.
- Meet the free float requirement of at least 20% of its outstanding shares being publicly tradable.
- Rank among the top firms in market capitalization, considering only free float shares.
- Demonstrate solid financial performance and meet regulatory compliance.
Companies don’t have a permanent spot in the index; if another stock outperforms an existing member based on the set criteria, it can get bumped out. That’s exactly what happened in the latest PSEi rebalancing in February 2025.
This time around, AREIT and CBC earned their spots, replacing Nickel Asia Corporation and Wilcon Depot Incorporated, which were moved to the PSE MidCap Index. Notably, AREIT made history as the first-ever REIT or Real Estate Investment Trust to join the PSEi, a milestone that highlights growing confidence in REITs as a long-term investment option.
“The inclusion of AREIT and CBC in the PSEi signifies that they have reached a level of liquidity, market capitalization, and trading activity comparable to some of the largest firms in the Philippines,” Beltran told Rappler.
If you’re curious about which companies make up the PSEi, here’s the latest lineup as of February 3, 2024:
- Ayala Corporation (AC)
- ACEN Corporation (ACEN)
- Aboitiz Equity Ventures, Inc. (AEV)
- Alliance Global Group, Inc. (AGI)
- Ayala Land, Inc. (ALI)
- AREIT, Inc. (AREIT)
- BDO Unibank, Inc. (BDO)
- Bloomberry Resorts Corporation (BLOOM)
- Bank of the Philippine Islands (BPI)
- China Banking Corporation (CBC)
- Century Pacific Food, Inc. (CNPF)
- Converge ICT Solutions, Inc. (CNVRG)
- DMCI Holdings, Inc. (DMC)
- Emperador Inc. (EMI)
- Globe Telecom, Inc. (GLO)
- GT Capital Holdings, Inc. (GTCAP)
- International Container Terminal Services, Inc. (ICT)
- Jollibee Foods Corporation (JFC)
- JG Summit Holdings, Inc. (JGS)
- LT Group, Inc. (LTG)
- Metropolitan Bank & Trust Company (MBT)
- Manila Electric Company (MER)
- Monde Nissin Corporation (MONDE)
- Puregold Price Club, Inc. (PGOLD)
- Semirara Mining and Power Corporation (SCC)
- SM Investments Corporation (SM)
- San Miguel Corporation (SMC)
- SM Prime Holdings, Inc. (SMPH)
- PLDT Inc. (TEL)
- Universal Robina Corporation (URC)
However, note that not all stocks in the PSEi carry equal weight. The index follows a market capitalization-weighted system. To put it simply, bigger companies have a greater influence on its movement. Market capitalization is determined by multiplying a company’s stock price by its outstanding shares, but only the publicly traded (free float) shares are counted.
For investors, this weighting system means that not all PSEi stocks contribute equally to market trends. This is why when heavyweights like SM Investments, BDO, or Ayala Corporation see big price swings, they can significantly impact the overall index. Meanwhile, a sharp rise in smaller index stocks won’t move the PSEi as much.
Why the PSEi matters for investors
For retail investors, the PSEi’s movement impacts stock prices and influences trading behavior. When a company enters the PSEi, its stock often sees a surge in trading activity as institutional investors and index-tracking funds — such as mutual funds, UITFs, and ETFs — adjust their portfolios. More visibility often means better liquidity and potential price appreciation, at least in the short term.
But this doesn’t mean blindly jumping in. Index inclusion doesn’t guarantee long-term success — some stocks rally temporarily but eventually settle based on their fundamentals. Investors should still look at a company’s financial health, growth potential, and industry outlook before making decisions.
“Retail investors should assess their risk tolerance and investment goals before taking positions in these stocks,” Beltran said. “While index inclusion is certainly a positive indicator, the ultimate decision should be grounded in a thorough evaluation of fundamentals, market trends, and time horizon.”
Investors also sometimes view the PSEi as a barometer for market sentiment. When the index is rising, investors tend to be optimistic (bullish), meaning they expect prices to continue climbing and economic conditions to improve. A bull market can create a rising tide that lifts all boats, pushing up stock prices across various sectors. With stock prices high, some investors see this as a good time to take profits, especially if they bought in at lower levels.
On the flip side, when the index is falling, investors can be pessimistic (bearish), signaling investor concerns over economic uncertainty, corporate earnings, or global events. While many may retreat from the market during these times, some investors see a bear market as an opportunity to bargain hunt for fundamentally strong companies with low stock prices.
Right now, the PSEi is teetering on the edge of bear territory. By the end of January, the index closed at 5,862, a more than 28% drop from its recent high of 7,554 on October 7. That’s past the 20% decline that usually defines a bear market.
While that may partly be due to the effects of the index rebalancing, it’s also reflective of issues hounding the local economy. Foreign investors have been pulling out of emerging markets like the Philippines in favor of safer US bonds that also offer an attractive interest rate. The PSE still relies heavily on foreign capital, and local retail participation is not yet strong enough to offset these outflows. – Rappler.com
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