Stock market seen to weaken further despite silver lining

Further weakness is seen in the stock market this week, following the trend set last week which was marked by profit-taking and foreign selling.

 However, online brokerage firm said long term prospects appear to improve with recent developments in the Senate as well as the hope that mass vaccination can start late next year.

“The CREATE bilk. the final version of the 2017 TRAIN 2 will be a primary point of discussion for 2021, especially for the next earnings reporting seasons,” the brokerage said.

It noted that, the reduction in corporate income tax “will significantly pad earnings recovery stories for 2021… but also opens up the table for larger cash dividends.” 

“Outside of the CREATE bill, the Senate also passed the P4.25 trillion 2021 budget, relieving investors of a 2019 delay repeat. Vaccine orders (2 million doses initially, 20 million next) from AstraZeneca have also reportedly been made, setting up mass vaccination by the second half of 2021,” said.

It added that, “Needless to say, the lining is becoming more visible—and it is silver. Range trade.”

Meanwhile, BDO Chief Market Strategist Jonathan Ravelas warned that last week's close at 6,791.46 “highlights further weakness towards the 6,700 levels. Any rebound could just be limited towards the 7,000 levels.”

Looking forward, COL Financial is recommending Metro Pacific Investments Corporation because its tollway subsidiary has been given a rate hike and this should boost revenues starting next year.

Abacus Securities Corporation is rating ICTSI a BUY after noting that the firm’s finances appear to be practically unscathed by the pandemic despite worst expectations with regard to global trade.

ICTSI’s EBITDA has actually growth while its volumes “were clearly more resilient than we thought and the company’s wide geographical footprint provided the diversification needed,” said Abacus.

The firm is also recommending Cosco Capital as its price has stayed relatively flat despite the recovery seen by most stocks.

It noted that, the stock is undervalued even if based on its 49 percent ownership of Puregold alone.

“What this means is that you are getting the price of Puregold at a 40 percent discounts plus its real estate, specialty retail and liquor distribution businesses for free,” Abacus said.