Earnings, GDP, COVID updates to drive prices

Published August 2, 2020, 10:00 PM

by James A. Loyola

While investor sentiment is seen to continue being weighed down by the sharp rise in COVID-19 cases in the country, they are also seen to take cues this week from second quarter corporate earnings reports as well as the second quarter gross domestic product figure.

“This week, the investing community would get a better glimpse of first half results, with earnings announcements slated for release from Globe Telecom, Metrobank, SM Investments Corporation, Metro Pacific Investments Corpoation, PLDT, the San Miguel Group, International Container Terminal Services Inc. and Ayala Land,” said online brokerage 2Tradeasia.com.

It noted that these firms comprise 37 percent of the market capitalization weight to the index (or another 27 percent of PSEi member firms).

 “In essence, the market would likely react based on second quarter GDP announcement this week, although fund managers aiming for 2021’s recovery angle would be on a prowl for bargains,” 2Tradeasia said.

The firm also pointed out that, aside from these reasons, slower sessions might characterize August’s because of the Chinese ghost festival falls on this month.

 Philstocks Financial Research Associate Piper Tan expects the major catalyst for the market will be overseas developments such as the geopolitical tensions between the US and China and the development of a vaccine against the SARS-COV2 virus.

 Investors will also be waiting for the government to disclose its plan for the reopening of the economy given the rising cases of COVID-19 in the country, particularly the National Capital Region which accounts for almost 40 percent of GDP.

BDO Chief Market Strategist Jonathan Ravelas said the market is still focused on “renewed concerns over the pandemic’s growing impact to the economy after the government reported daily record surge in coronavirus cases. This could further delay the full reopening of the economy.” 

He noted that the PSEi’s close at 5,928.45 last week “highlights the bears are in control with the recent break below the 6,000 levels. Expect further tests towards the 5,500 to 5,800 levels in the near-term.”

While the near-term looks grim, Abacus Securities Corporation advises investors with a long view (beyond 2020), to start buying shares of BDO Unibank.

 “We still recommend BDO as part of our pandemic portfolio on low valuation and adequate capital buffers. Despite booking the large loss in the second quarter, capital ratios are still a good distance from minimum levels for BDO. If one can withstand the near-term volatility, slowly accumulate on dips,” it noted.

 COL Financial is also recommending a BUY for BDO after upgrading its fair value estimate to P129 per share even though “we expect BDO’s earnings to be hurt by the COVID-19 pandemic and the ECQ as these are expected to slow economic activity which will inevitably curtail loan demand and financial transactions.”

There are also expectations of some deterioration in asset quality amidst the suspension of business operations in various locations.

 “However, we believe the negatives have already been priced in,” said COL which noted that its current price is significantly below its 5-year historical average.

 Abacus is also recommending Wilcon Depot despite its being hit by the closure of its stores during the Luzon lockdown because “we believe the company can post a faster rebound than other retailers as the lockdown showed that existing households require maintenance and replacement of hardwares.” “In a way, WLCON should benefit from the higher rate of wear and tear of these hardwares as families stay longer at home. We see that any dips from the stock is an opportunity to BUY into the longer term trend of increasing family formation,” it added