Stocks to trade with downward bias

Published January 25, 2021, 6:00 AM

by James A. Loyola

The local stock market is seen to trade with a downward bias this week even as investors await the release later in the week of the gross domestic product figure for the fourth quarter of 2020.

“The local market’s bias is still seen to be tilted to the downside amid waning optimism and lingering pandemic worries aggravated by the detection of more cases with the new and more infective COVID-19 variant,” said Philstocks Financial Senior Analyst Japhet Tantiangco.

He explained that, “The further spread of the new strain in the country is expected to weigh on market sentiment since it poses the risk of returning to the more stringent social restriction measures which is seen to derail our economic recovery.”

Meanwhile, Tantiangco said “Investors are also expected to look towards the upcoming fourth quarter and full year 2020 GDP data…to see if there will be a significant improvement compared to the preceding quarter.”

Online brokerage firm said the anticipated release of GDP figures for 2020 “may push anticipation-driven volatility within the next few sessions.”

Photo credit: PSE file.

The government’s economic team expects -5.5 percent; World Bank -8.15 percent; while the Bangko Sentral expects a more conservative -9 percent. Analysts’ consensus estimate is around -8 percent. 

“And while negative figures may have already been baked-in in share prices, any downside surprise will be detrimental to already directionless sentiment, particularly for cyclicals and recovery-correlated shares,” said. 

The brokerage also aired concern over rising inflation since November as this will help policy makers to be more aggressive to stave off stagflation concerns while noting that discretionary consumer spending may also be affected.

For recommended buys, stock analysts are looking at companies that are seen to be recovering and will be among those to benefit the most from the reopening of the economy once more people are vaccinated.

“Among the listed consumer companies, we prefer D&L Industries as we think it is in a prime position to capitalize on the gradual recovery of the economy. The company has also proven to be relatively more resilient amidst rising input costs thanks to its strong portfolio of high-margin specialty products,” said top online brokerage firm COL Financial.

  It added that, “DNL is a strong beneficiary of growing popularity of health, wellness, and sanitation trends brought about by the pandemic. Demand for products catering to the said trend is expected to remain strong under the new normal, supporting the company’s longer-term growth.”

COL stressed that, “We think DNL’s strong recovery prospects are not yet fully priced in.”

 Meanwhile, COL is also looking favorably at cement stocks Cemex Holdings Philippines and Eagle Cement Corporation as these are poised to do better this year with the government’s commitment to ramp up infrastructure building and with the expected recovery of the overall economy.

 “Moreover, both companies have already adapted to the new normal and have resumed with their respective capacity expansions,” said COL.

   It added that, “based on current prices, both companies present significant upside potential to our new fair values. As such, we are reiterating our BUY ratings for both companies.”

Abacus Securities Corporation is again recommending Puregold Price Club after the stock has been sold down to a level that makes it cheap.

  “One reason for the stock’s decline points to disappointed investors who expected better results owing to the fact that the company is one of the industries that remained open during the height of the lockdown,” it noted.

   However, Abacus said that, “Despite the disappointment, PGOLD still maintains good earnings growth…We believe the selling is overdone as earnings continue to grow.”