GDP, COVID to continue pressure on stock prices

Published August 9, 2020, 10:00 PM

by James A. Loyola

With sentiment dampened by the worse-than-expected economic recession, investors will be looking for cues from corporate earnings reports as well as COVID-19 case updates to gauge whether quarantine measures will be eased or tightened further.

AAA Equities Head of Research Chris Mangun said “Investors are having a hard time trying to see the light at the end of the tunnel as we are almost in the middle of the third quarter and coronavirus cases continue to climb.”

“Moves to raise hospital capacity and isolation zones would help appease concerns on the local economy’s ability to handle COVID-19, in light of calls to have more industries re-opened,” said online brokerage

It noted that, “it might take time before economic numbers reverse to positive terrain, unless strategic plans on health infrastructure support are outlined, while waiting for vaccines.”

 Mangun added that, “Supportive monetary policy adjustments or more fiscal stimulus from the government will strengthen the economy’s recovery and will also improve investors’ sentiment. The market may continue sideways until this happens.”

As valuations have fallen to attractive levels, believes seasoned players may start picking up select stocks, “banking on the release of an acceptable vaccine, and see opportunities in riding the market’s volatility.”

“Conservative bets meanwhile, might skew towards dividend bets, others on stocks poised to benefit from global investors’ switch towards alternative havens (such as precious metals),” the firm said.

BDO Unibank Chief Market Strategist Jonathan Ravelas said last week’s close at 5,846.02 “signals further consolidation within 5,700 to 6,000 levels in the near-term.”

Based on recent earnings reports and prospects of a recovery, both Abacus Securities Corporation and COL Financial are recommending D&L Industries to investors.

“DNL is clearly cheaper compared to historical averages and could be an alternative for those looking to play an eventual rebound in the consumer sector. Buy on weakness,” said Abacus.

For its part, COL Financial said that, “Despite the challenging economic environment due to COVID-19, DNL is on its path to recovery as the economy is gradually improving from a very bad quarter. Furthermore, DNL is one of the more resilient manufacturers in its particular industry.”

  It noted that, “management shared that DNL has gained more market share in the commodity business and could also realize similar gains in the high margin specialty products business. This will be beneficial for DNL as it will emerge stronger once the pandemic is over.”

 Abacus is also rating EastWest Bank a BUY as its first half net income is already 116 percent of full year consensus and 94 percent of 2021 estimates.

“And even if the bank merely breaks even for the rest of the year, the stock is trading at less than 4.0 times earnings. EW is clearly undervalued although it may take some time for investors to appreciate it,” it noted.

COL Financial is also recommending PLDT after a recent upgrade in fair value estimate “due to the company’s good fundamentals and attractive valuation.”  “We continue to like TEL because of a) the strong growth of its mobile data business; b) its dominant position in the home broadband business and c) its strong balance sheet,” the online brokerage said.