Stocks to test market’s strength this week

Published February 8, 2021, 6:00 AM

by James A. Loyola

After making huge gains last week, investors are seen to test the stock market’s strength this week amid concern over the new COVID-19 variant on one side and vaccine roll-out news and the passage of the corporate recovery bill on the other.

“Next week, the local market is seen to move sideways with a downward bias as investors monitor our COVID-19 situation while looking for catalysts that would support economic and corporate recovery prospects,” said Philstocks Financial Senior Analyst Japhet Tantiangco.

He noted that, “The detection of additional COVID-19 cases in the country with the more infective variant from the United Kingdom may dampen sentiment. Economic worries amid the threat of a rising inflation may also weigh on the local bourse.”

Photo credit: PSE Information Desk

Tantiangco added though that, “Catalysts that may tilt the local market’s bias to the upside include the Malacanang’s signing of the CREATE bill, as well as narratives that would point to the availability of a COVID-19 vaccine and further easing of social restrictions in the Philippines soon.”

Online brokerage firm noted that, “On a more positive note, corporate stories will likely be tied to vaccine deployment, and progress on this front particularly at the LGU level will help put a floor to any possible kneejerk price action.”

He said investors are also expected to look towards the upcoming Foreign Direct Investment data and the policy rate decision from the Bangko Sentral ng Pilipinas this week for clues on the local economy.

Meanwhile, also said “the PSEi’s staying power will be tested given heightened volatility from the upcoming earnings season—when capex spending and earnings per share recovery stories for the year are reaffirmed.”

Globe Telecom will be the first to report its 2020 earnings this week, but other index firms are expected to follow suit for the remainder of February until March.

“While an expected rebound quarter-on-quarter is expected, the more pressing concern will be on first quarter 2021 indicative figures plus messaging for 2021 story,” said

The brokerage advised investors that, “Amidst periods of rising consumer prices, recall that the best bets tend to be natural hedges (such as real estate, REITS, dividend stocks) and those that can pass-on the input cost burden to consumers. Trade the range.”

Philstocks is recommending investors to trade AllHome because “construction activities in the country are expected to increase both public and private as the economy tries to recover from the pandemic with the help of government spending on infrastructure projects.”

“We are assuming that the government will no longer impose a construction activity ban in the coming months as the Philippines no longer afford stringent lockdown measures. This is seen to be positive for AlHome. Also, in terms of price to earnings ratio, it is cheaper than its major competitor in the market,” it added. 

Meanwhile, COL Financial has a BUY rating on SSI Group after noting that, “While SSI earnings remain challenged amid the COVID-19 pandemic, we believe this is already priced in by the market.

Furthermore, the challenging earnings situation is only expected to be temporary, and sales are already gradually returning to pre-pandemic levels.”

Abacus Securities Corporation is recommending a BUY for LT group due to strong dividends expected from its tobacco business which had likely outperformed expectations for 2020.

It noted that, dividends may even go higher should Philippine National Bank book a windfall gain from the sale of prime real estate assets. 

Meanwhile, Abacus said it is overweight on banks in general because “we believe that pandemic-induced issues for the banking industry (higher provisions for non-performing loans and weak loan growth) have already been priced in.”

It also pointed out that “the financials sub-index did not participate as much as the others in the steep rally that began in October and it is the only one that is trading below historical mean valuations. This is why we are overweight on banks.”