The local stock market is seen to remain weak this week as new COVID-19 cases continue to surge while large amounts of cash are mopped up by two major capital raising activities.
“The local market may extend its decline on the back of pandemic concerns. The resurgence of COVID-19 cases, if it continues, is expected to cloud market sentiment due to the risks it poses against the economy including the possibility of the reimposition of more stringent social restriction measures,” said Philstocks Financial Senior Analyst Japhet Tantiangco.
He added that, “The resurgence of cases is seen to weigh on consumer and business confidence which in turn would negatively affect the overall economy.”
Meanwhile, online brokerage 2TradeAsia.com noted that, “Capital is not infinite, and pending stellar catalysts to push bulls forward, funds may have repositioned holdings to accommodate participation in initial public offerings and bond offerings.”
“Cebu Air’s preferred shares offering DDMPR’s IPO alone siphoned P27.5 billion in capital, and volatile sessions may persist, until the impact of reflation bites into sentimental,” it added.
The firm said other listed companies have also line up bond offerings, because, “With inflation fueling expectations of higher cost of capital later in the year, there may be some urgency to lock in low rates now, which may funnel liquidity away from the secondary equity market, at least in the medium term.”
Tantiangco added that, “Aside from our COVID-19 situation, investors are also expected to monitor the US bond yields. A further rise in the said yields may lead to selling pressures for the local market. Investors are also expected to take cues from the upcoming corporate earnings reports next week.”
BDO Chief Market Strategist Jonathan Ravelas said “last week’s close at 6,728.55 signals consolidation between 6,700 and 6,850 levels in the near-term as the 6,700 levels held ground. But a sustained break below the 6,700 will trigger tests towards the 6,300 to 6,500 levels.”
Based on last week’s financial reports, COL Financial said it has a BUY rating on Aboitiz Power Corporation despite the poorer earnings outlook for 2021 due recent unplanned outage of GNPower Mariveles.
“We believe that bulk of the negatives have been priced in. AP’s share price has declined by 4.2 percent in the past 12 months, underperforming the PSEI’s 4.6 percent increase. AP’s valuation has also become increasingly attractive,” it added.
Regina Capital Development Corporation also has a BUY rating for AP because its expansion plans, “along with the gradual improvement in demand across the Residential, Commercial, and Industrial segments, will likely drive top and bottomline expansion over the next two years.”
COL is also reiterating its BUY rating on Filinvest Land Inc. after it firmed up plans for a real estate investment trust IPO.
“The proposed listing of Cyberzone Properties Inc. (REIT) could act as a catalyst as it would show how undervalued FLI shares are. The potential market cap of CPI of P40.6 billion is 43.4 percent higher than the current market cap of FLI who is CPI’s REIT sponsor,” it said.
COL also noted that, “Given FLI’s depressed valuation, the market is not only undervaluing CPI but is also not valuing FLI’s residential segment and landbank.”
Philstocks is advising investors to trade Axelum Resources Corporation “as it shows positive bias and primary movement remains uptrend.”
It said “foreigners are also supporting the price movement with month-to-date and year-to-date net buying. Fundamental-wise, the global recovery is positive for the company as demand for coconut products is expected to increase. However, a strong peso may negatively affect financials.”(James A. Loyola)