Utilico flags the emerging market hotspot set for revival in 2026
Utilico Emerging Markets (UEM) is touting the overlooked Philippines as a market set for revival this year.
The Southeast Asian region was a once favoured emerging market in the 2010s but has largely lagged the broader emerging market index over the past decade. While the MSCI Philippines index enjoyed a stellar rise of 80% between 2010 and 2015 versus a 12% decline in the broader MSCI Emerging Market index, that has reversed in the decade to 2025, falling 7% while the broader index climbed 119%.
Charles Jillings and Jacqueline Broers, managers of the £559m portfolio of emerging market infrastructure and utility stocks, believe the Philippines is poised for a recovery, which explains why it is now the second largest weighting in the portfolio at 11%.
They said the underperformance since 2015 has been driven by the ‘valuation starting point’, with MSCI Philippines price/earnings valuations averaging 17.3 times between 2010 and 2015 versus a ‘much more attractive’ 9.9 times today, in contrast to the broader emerging markets index at 13.1 times.
The Philippines represents less than 0.5% of the broader index, ‘making it easy for investors to overlook the opportunity set and ignore the attractive structural growth drivers that underpin long-term growth’ in the region, they said.
This includes favourable demographics and a ‘resilient’ economy, although the managers said while the ‘era of 7%-plus GDP growth…is likely behind us’, the economy still continued to expand 5% in the first nine months of 2025, reinforcing its position as one of the fastest growing emerging economies.
The area is not without its problems. GDP growth slowed in the third quarter due to corruption allegations tied to recent flood control projects, which also weighed on investor sentiment and has seen foreign inflows remain weak.
While foreign investors may be shunning the region, Jillings and Broers said the Philippines is a domestically-orientated economy with consumption accounting for 76% of GDP. Households are in a good position given stable inflation of 1.7% and recent cuts to interest rates.
The Philippines therefore offers ‘compelling, overlooked opportunities’, including International Container Terminal Services, a global port operator with 33 terminals in 19 countries.
It is a ‘natural beneficiary’ of the expansion in global trade and has negotiated tariff increases across jurisdictions while driving operational efficiency.
The water sector is also a key play for UEM following the publications of the ‘Philippine Water Supply and Sanitation Master Plan’ by the Department of Economy, Planning and Development in 2021.
Authorities are aiming to provide a universal access to water and sanitation by 2030 through a $19bn (£14bn) infrastructure investment, largely supported by private capital.
‘This has acted as the catalyst for a transformation shift in the regulatory backdrop, creating a more supportive return environment intended to encourage the investment required,’ Jillings and Broers said.
Beneficiaries of the plan have been Maila Water and recently-listed Maynilad Water Services. The former is currently a top 10 holding at 3.9% of the portfolio while the managers participated in the latter’s initial public offering in October.
A recent trip to the Philippines ‘reconfirmed our constructive view on the Philippines and the strength of our UEM portfolio holdings’, said the managers.
Although the large weighting to the Philippines does not appear to have been a positive for UEM in recent years, with shares up 45.7% versus the sector’s 59.6% over three years, the managers are optimistic.
‘We continue to find attractive long-term investment opportunities within the utility and infrastructure sectors, which remain well-positioned to benefit from structural growth drivers and supportive domestic dynamics.’
