Trading at the local stock market this week is seen to be weighed down by the surge in COVID-19 cases as well as the impact of high inflation while corporate earnings and the employment report may provide some relief if there are any positive surprises.
“Next week, the local market may decline on the back of COVID-19 concerns and elevated inflation expectations,” said Philstocks Financial Senior Analyst Japhet Tantiangco.
He noted that, “The resurgence of COVID-19 cases including the increasing number of those with the more infective strains from the United Kingdom and South Africa may weigh on market sentiment due to the adverse impact it can have on the economy.”
Meanwhile, Tantiangco said “Inflation worries amid supply side problems in some of our agricultural commodities primarily pork, and increasing oil prices may also add downward pressure to the market.”
Investors are also expected to monitor the movement of the US bond yields. A further rally in the said yields may lead to more foreign fund outflows which would intensify selling pressures.
Online brokerage 2TradeAsia.com said that, with the 4.7 percent inflation rate for February, “the market will have to deal with the possible rate squeez that this may entail.”
“With the BSP’s monetary policy meeting just around the corner (March 25), expect funds to run more prudent trading strategies; after all, even if dovish rates are maintained, transitory inflation will impact margins negatively, on top of already frail consumer confidence.”
The firm said the market will remain range-bound, with multiple attempts at breaking past the critical 7,000 level have yet to be successful.
“Vaccine deliveries, however, may mean that the road to immunization is within sights. Any positive headline on this front will always be appreciated; after all, in drought, every raindrop counts,” 2TradeAsia.com said
BDO Chief Market Strategist Jonathan Ravelas said last week’s close at 6,881.37 shows the bourse is having difficulty sustaining the rally towards 7,000 levels.
“Be on the lookout for a sustained break below the 6,700 levels as it could see a test towards the 6,500 levels,” he warned.
Based on 2020 earnings reports, stock analysts have firmed up their stock recommendations.
COL Financial has a BUY rating on D&L Industries because “We believe DNL is in a prime position to capitalize on the recovery of the economy given its diversified portfolio of products catering to different consumer groups.”
COL also has a BUY rating on Universal Robina Corporation, which has managed to hold its ground with notable market share gains and effective cost control efforts. Meanwhile, Abacus Securities Corporation advises clients to buy International Container Terminal Services Inc. “Although risks arising from possible new Covid variants and delays in vaccine rollouts because of supply shortages still remain, there are signs that the tide is starting to turn,” it said.