The local stock market is seen to be weighed down by concern over the impact of the new COVID-19 strain although this may be counterbalanced by excess cash in the system as well as developments overseas.
“Next week, we may see sideways movement from the local market with a downward bias. Pandemic worries are still expected to weigh on investor sentiment especially now that the new and more infective COVID-19 variant has already entered the country,” said Philstocks Financial Senior Research Analyst Japhet Tantiangco.
He added that, “Further transmission of the new strain in the country raises the risk of returning to the more stringent quarantine measures which in turn will delay economic recovery.”
On the other hand, Tantiangco said “COVID-19 vaccine narratives primarily those which would point to a roll out in the Philippines soon may spur optimism.”
Investors may also look towards the upcoming foreign trade data of the Philippines for clues on the local economy’s condition relative to its trading partners.
Meanwhile, online brokerage 2TradeAsia.com said “The following week will be particularly interesting for global market watchers, in lieu of China releasing fourth quarter gross domestic product figures on Monday.”
Median forecast is at 6.1 percent (from 4.9 percent in the third quarter) and, if achieved, will mark China returning to pre-COVID GDP expansion.
“Any outperformance will set the tone for emerging market economies' outlook for 2021,” 2TradeAsia.com said.
In the US, President Biden will officially assume office on Thursday and release his $1.9 trillion “rescue plan” comprised mostly of direct cash aid.
“This 'helicopter money' should prop-up consumer confidence until the vaccination drive takes effect, and may resonate to global supply chains in the near-term,” it said.
The brokerage also noted that, “turnover in recent sessions (daily average of P10.5 billion) have significantly eclipsed that of 2020 (P7.5 billion) and 2019 (P6.2 billion).”
This means money is making its way to equities due to depressed fixed income yields.
“While the market is not out of the woods yet, the case in favor of defensive and dividend stocks remains intact. Stay selective and range-trade,” 2TradeAsia.com advised.
While many stocks have risen to more expensive levels in the last two weeks, two stock brokerage firms are recommending AllHome Corporation which is still lagging behind its chief rival despite a strong rebound in sales.
Abacus Securities Corporation noted that foreign funds have been buying AllHome shares as it has been less affected by the pandemic last year and still enjoys pent up demand.
It noted that, the firm is among the few that continues to expand especially in the provinces where the companies generate higher profitability and have less stringent quarantines than Metro Manila.
Meanwhile, Regina Capital Development Corporation noted that AllHome’s rebound after the easing of quarantine measures quickly brought the firm back to pre-pandemic levels with its third quarter sales surpassing figures for 2019.
“In our view, this sets the tone for the quarters following. It is highly likely that fourth quarter 2020 revenues also posted an increase, especially since the holiday season typically boosts demand for HOME’s products,” RCDC said.
It added that, “We assume that HOME will be more aggressive with its expansions in 2021… With this, we expect positive sales and earnings performance for 2021— possibly even double-digit same store sales growth, not just because of last year’s low base, but also due to HOME’s well-positioned store network that is able to capture increasing demand.”
For its part, COL Financial is recommending Aboitiz Power Corporation and Manila Electric Company among the listed energy companies.
“We like AP because we expect its profits to recover sharply in 2021, by 74.6 percent to P17.6 billion, as it benefits from higher spot market prices and the start of operations of the 1,200MW Dinginin Coal Project,” COL said.
It added, “We also like Meralco. We forecast MER’s profits to grow by only 5.9 percent in 2021. However, its profitability is least vulnerable to the risks facing the power industry (lower selling prices, higher coal costs and unplanned outages) because bulk of its profits come from the distribution business.”