By Isa Jane D. Acabal

Shares of Maynilad Water Services, Inc. declined last week as investors locked in gains ahead of the company's entry into the Philippine Stock Exchange index (PSEi), while concerns over El Niño and proposed utility sector reforms added to selling pressure, according to analysts.

Maynilad, the Pangilinan-led concessionaire that supplies water to the western half of Metro Manila, completed one of the Philippine market's largest IPOs in recent years before its index debut.

PSE data showed Maynilad was the fourth most actively traded stock from July 27 to 31, generating a value turnover of P2.04 billion as 106.81 million shares changed hands. The stock closed at P18.80 per share on Friday, representing a 3.4% drop from P19.46 a week earlier. This underperformed both the benchmark PSEi, which slipped 0.7%, and the industrial sector index, which fell 4.7% over the same period.

Despite the weekly pullback, Maynilad shares are still up 11.2% year to date, outpacing the PSEi's 3% gain and the industrial sector's 6.6% decline.

Jervin De Celis, an equity trader at The First Resources Management and Securities Corp., attributed the drop primarily to profit taking following the company's robust post-IPO performance. He also pointed to broader risk-off sentiment tied to the US Federal Reserve's decision to hold rates steady, as well as policy signals from the President's recent State of the Nation Address (SONA).

"Next is the broader risk-off pressure tied to the unchanged Fed decision and SONA follow-through on power sector policy, which weighed on utilities generally," Mr. De Celis said in an e-mail.

In his fifth SONA on July 27, President Ferdinand R. Marcos, Jr. urged Congress to amend Republic Act No. 9136, the Electric Power Industry Reform Act (EPIRA) of 2001, and to prohibit the passing of system loss charges and the corresponding value-added tax (VAT) on to consumers.

Franco M. Fernandez, an equity research analyst at DragonFi Securities, Inc., noted that persistent concerns over El Niño's potential effect on water supply also pressured Maynilad shares. According to the state weather bureau, the current weak to moderate El Niño is expected to strengthen and persist through the first half of 2027.

"Sentiment may have also been dampened by President Marcos' SONA, which touched on tax and power sector reforms and served as a reminder to the market that government regulation remains one of the biggest risks for utilities," Mr. Fernandez said in a Viber message.

Mr. De Celis also cited classic "buy the rumor, sell the news" dynamics ahead of the latest PSEi rebalancing, noting that the heaviest passive-fund buying typically clusters on the rebalancing date itself rather than on the announcement.

Effective Monday, the Pangilinan-led water concessionaire replaced Converge ICT Solutions, Inc. in the PSEi.

"Market sentiment around Maynilad's PSEi inclusion was mixed to negative during the week, despite the news itself being widely anticipated and largely priced in ahead of the official announcement," Mr. Fernandez said. He explained that the elevated trading volumes associated with the rebalancing gave investors an opportunity to realize gains rather than open new positions.

"This implies the lingering overhang of El Niño concerns over water supply outweighed the positive optics of index inclusion, as investors used the liquidity to reduce exposure," he added.

Despite the near-term weakness, Mr. De Celis said the PSEi inclusion validates analysts' growth expectations. Price targets have been raised to P23.72 from P22.43 based on improved revenue growth and margin forecasts.

"Maynilad's PSEi inclusion is primarily a signal of strong institutional demand and improved visibility, rather than a call for fundamental re-rating," Mr. Fernandez said. "It should still support the stock's price in the long run, as buying pressure comes from two channels: index-tracking funds now required to hold it, and PERA account holders, since PSEi membership also makes Maynilad eligible for PERA investments," he added.

Cristina S. Ulang, head of research at First Metro Investment Corp., said Maynilad's PSEi inclusion, attractive dividend yield, and defensive business profile continue to underpin the stock's long-term investment thesis.

Looking ahead this week, Mr. De Celis said investors should monitor passive-fund rebalancing activity, the Bangko Sentral ng Pilipinas' next policy meeting, developments from the US Federal Reserve, and oil price volatility tied to tensions in the Middle East.

Mr. Fernandez said investors should also watch Maynilad's second-quarter and first-half earnings results, along with management's assessment of El Niño-related risks as water levels at Angat Dam, Metro Manila's primary freshwater source, continue to decline.

On the technical side, Mr. De Celis sees immediate support at P18 to P18.50. "I'd now treat P19-P19.10 as the level to reclaim on the upside, with P19.30-P19.50 as the next resistance," he said. Mr. Fernandez placed support at P18 and immediate resistance at P19 to P19.20.