The local stock market is seen to start weaker this week following the drop in US stocks in reaction to US President Donald Trump’s announcement that he has tested positive for COVID-19.
According to online brokerage 2TradeAsia.com, this is “a reminder that the pandemic remains to be the world’s primary cause of distress, and that it spares no one—from big political personalities to financial markets.”
Market investors will be also be looking at whether the House of Representatives can pass next year’s budget on time given the recent interruption on account for the struggle for the speakership.
“From a near-term, market standpoint, note that 10 percent of weighted market cap in the PSEi basket are tied to infra project initiatives. Any overhang, especially from the legislative side, (which crafts budgets) disrupts the flow of fiscal energy directed towards priority projects —much of which is currently in infrastructure and public works,” said 2TradeAsia.com.
The brokerage also noted that, “from a technical standpoint, the benchmark index continues its sideways marathon, forming a descending triangle pattern; by textbook definition, this formation heralds better some downside bias in the near-term. Stay cautious and opt for modest gains, at least until visibility for positive ‘sparkplugs’ take form.”
BDO Chief Market Strategist Jonathan Ravelas said the PSEi’s close at 5,999.40 last week “highlights some momentum to try the 6,000 to 6,300 levels in the near term” although “failure to stay above the 6,000 levels could signal a retest of the 5,700 levels.”
While recent bargain-hunting had pushed up stock prices, Abacus Securities noted that there are still some value plays in the market and its top picks are East West Bank, LT Group, and First Gen Corporation.
For EW, Abacus said net interest margins should cushion the impact of higher non-performing loans. It is also set to benefit from a lower interest rate environment.
As for LTG, Abacus noted that “it has become a pure consumer play with the tobacco business taking the lead in the company’s earnings. The sale of Philippine National Bank’s ROPA (real estate and other properties acquired) may add icing to the cake.”
Meanwhile, FGEN is not only cheap but is also looked at favorably because of the progress in the construction of its liquefied natural gas facility.
Abacus is also recommending Universal Robina Corporation as the recovery in its share price is seen to continue as domestic sales recover with some of its overseas businesses as well as due to lower raw material prices.
“URC can be expected to post decent earnings this year mainly coming from the peso’s appreciation (lower interest expense and forex translation of foreign loans), as sales remain flat, margins are steady and operating expense is flat due to its supply chain transformation,” Abacus said.
It added that, “By next year, we may expect to see URC maintain a double-digit growth path coming from a rebound in sales, steady margins, and subdued opex as the company also realizes fruits from its supply chain transformation.”