Weak stocks to continue

Published March 29, 2021, 6:00 AM

by James A. Loyola

The Philippine stock market is seen to weaken further this short trading week as COVD-19 cases continue to surge, sparking talks of the imposition of even more stringent lockdown measures—the government’s main tool in trying to keep infections down.

“The local market may decline next week as pandemic worries are seen to dampen sentiment,” said Philstocks Financial Senior Analyst Japhet Tantiangco.

He said “The rising pace in the increase of cases, the uncertainties on our vaccine procurement, and the possibilities of the implementation of more stringent restrictions are clouding our economic and corporate outlook. These in turn are expected to weigh on the market.”

Photo credit: (https://www.pse.com.ph/)

“As mentioned in our past note, beyond 8,000 new cases per day will signal an aberration in the recovery curve for COVID-19 cases and may necessitate some hard counters from the government in order to rein back further damage to public confidence,” said online brokerage 2TradeAsia.com.

In order to reassure already agitated market participants, the firms said that vaccine rollout must produce material progress. As of end-March, more than 500,000 have been vaccinated. “This is a measly 0.5 people vaccinated per 100 people, or 5 percent—note that herd immunity for COVID is projected to be achieved at 70 to 90 percent,” 2TradeAsia.com noted.

Meanwhile, 2TradeAsia.com also said that the first quarter results are expected to immediately trickle in April. “After an expectedly forgettable 2020 outing in earnings, eyes will hunt for inflection points,” it added.

“While we do expect better results for the first quarter of 2021, ongoing bubble in NCR-plus will weigh clown on capex ambitions, and prolong the recovery curve.”

Thus, the firm advises investors to “watch the space for staples, grocery retail and other quarantine plays, as lowdown speculators pivot from recovery plays, and similarly, stay holding cash for now.” 

While turnover may be lower during the Holy Week, there may be quarter-end window-dressing activities by funds. “Remain defensive and ponder sticking to reliable plays, such as dividend and bruised blue chips,” 2TradeAsia.com said.

While stocks are getting cheaper, COL Financial Chief Equity Strategist April L. Tan said “Admittedly, being cheap is not a good enough reason for stock prices to move higher. However, every crisis creates opportunities and stocks would not trade at such a cheap valuation if there were no problems.”

“Consequently, the market’s prevailing weakness is an opportunity for patient investors to make money over the long-term. Just be sure to manage you risk by buying slowly and using long-term funds,” she advised. 

She noted that, “Theoretically speaking, defensive stocks should be better under the present scenario… However, we should not ignore cyclical stocks either because many of them are trading at extremely cheap valuations.”

“Aside from the stocks that are already part of our COLing the Shots stock picks, I’m adding CNPF, DNL and ALI. CNPF and DNL are showing resilience to the crisis and are trading at attractive valuations. Meanwhile, ALI underperformed the market so far this year,” she said.

COL is also rating telcos PLDT, Globe and Converge as buys since “The new normal is pushing internet traffic to newer heights as more people and companies undergo various forms of digital transformation. As such, we continue to like the telco sector, especially in the underpenetrated fixed broadband segment.”

Abacus Securities Corporation is recommending Puregold because “we believe the company can sustain its growth as pantry restocking and other stay-at-home consumer trends carry on through the pandemic.”

It is also recommending Puregold’s parent company COSCO saying the stock is clearly undervalued given its huge property holdings and a resurgent PGOLD.