Rising COVID cases to weigh on stocks

Published June 28, 2020, 12:00 AM

by manilabulletin_admin

By James A. Loyola

Investors are seen to remain bearish this week despite the recent rate cut as concern grows over the rising COVID-19 cases in the Philippines and overseas.

“Bearish sentiment is seen to be building up as the local market posted two straight weeks of decline, shedding 4.39 percent in the process. This trend may continue next week as COVID-19 risks weigh on economic recovery hopes,” said Philstocks Financial Senior Analyst Japhet Tantiangco.

He noted that, “The strength and the speed of our recovery remains uncertain amid the unabated rise in Coronavirus cases… This points to a possible extension of our social restrictions which will keep our economy from operating at full capacity. A reversion to stricter forms may even be possible which, if done, would aggravate the economy’s losses.”

This sentiment is shared by Abacus Securities Corporation which said, “New cases are more than triple what they were in May even as the number of daily tests has only gone up by 50 percent to 60 percent. This is not what the market needs to hear and, in our view, this puts a near term ceiling for the index.”

Tantiangco added that foreign funds exodus may also continue as the global economy continues to deal with the pandemic’s impact. Last week, net foreign selling averaged P1.15 billion, higher than the prior week’s average by 13.06 percent.

He expects market support to remain at 6,100 while a resistance is building up at 6,350 and it will be likely that the market may test the strength of the support level.

Cherry picking will continue to be the trend and Abacus is still recommending MacroAsia Corporation because it remains one of the market’s worst performers year-to-date even though the stock has already bounced significantly from its 52-week low.
“If we are correct that the travel sector will bounce back in 18 months or so (earlier if the promised vaccine starts to become available in the fourth quarter), the stock could be another that has the potential to double over an 18 to 24 month period,” it added.

Meanwhile, COL Financial is rating Vista Land and Lifescapes a BUY due to its cheap valuation “although we expect VLL to be hurt by the ongoing COVID-19 pandemic.”

It noted that, at its current market price, Vista Land is trading at only 7.8 times its 2020 earnings estimate and 0.49 times its book value.

COL is also reiterating its BUY rating on Metro Pacific Investments Corporation even though near term sentiment “will most likely remain negative due to the uncertainties on Maynilad.”

However, COL said “we believe that concerns are overblown given MPI’s depressed valuation. Based on MPI’s current market price, the company is trading at a 52 percent discount to its net asset value which implies that Maynilad and its toll road business are already worthless.”