The local stock market is seen to remain weak as there is no foreseen event to spur investors into buying mode and push up share prices.
“We expect the market to be still below the 6,000 level amid the lack of upcoming catalyst for the market aside from FDI (foreign direct investments) and BoT (Bureau of the Treasury) data which will be released on Thursday. We think that this will have a minimal effect for the market,” said Philstocks Financial Research Analyst Piper Tan.
He noted that, “Corporate catalyst such as M&A (mergers and acquisition), JV (joint venture), and partnership will be a major catalyst not for the sentiment for the market but for individual stocks.”
“The news about vaccine may also be a key catalyst if proven to produce good results but I think investors are now worried about the depressed economy, how the private sector will recalibrate its business model to cope with the new normal and if the government will have a definite plan on virus containment,” Tan said.
With the PSEi currently trading below 5,800, online brokerage firm 2TradeAsia.com said optimists are hoping it will return to the 5,800 to 6,000 zone while pessimists “will be waiting in the wings for a further break to 5,500 (for bargoin-hunting).”
However, it noted that, “The seasoned eye will look at both and trade the range either way, albeit conservatively and with an intention to exit at the slightest of gains.”
Tan expects the PSEi to move within the 5,700 to 6,000 level with strong resistance at 6,000.
“Market participation depicts that investors are not confident enough to enter equities market since corporate profits and economic activity will remain subdued due to the quarantine measures and virus containment in the Philippines,” he said.
BDO Chief Market Strategist Jonathan Ravelas said “Confidence in the economy remains pinned down by the steady stream of new COVID-19 cases despite looser mobility restriction. Improvement in investor sentiment hinges on earnings and further reopening of the economy.”
He added that last week’s close at 5,785.09 “highlights the market’s vulnerability to sell-offs. Continue to see the market to range between the 5,700-6,000 levels in the near-term.”
While stocks remain weak, COL Financial is advising investors to slowly accumulate stocks such as Ayala Land, Megaworld Corporation, BDO Unibank, Metrobank, and D&L Industries even though their businesses remain vulnerable to the ongoing pandemic.
“Although the said companies’ profits are expected to stay weak in the near term, this is only temporary. As such, now is a great time to take advantage of the said stocks’ cheap valuations as patient, long term investors will be rewarded once these companies’ profits recover and return to normalized levels,” COL said.
Meanwhile, Abacus Securities is recommending Century Pacific Food which seems to be undervalued among defensive stocks.
“Current valuations already show it is priced at a steep discount to its peers (26.5 times price to earnings ration and the PSEi (15.8 times) since it is only trading at 14.1 times…it is also trading 1.5 times below its average PE since listing,” noted Abacus.
It added that “we believe these discounts are unwarranted given the company’s growth prospects and ability to deliver.”