The local stock market is seen to continue falling as COVID-19 cases in the Philippines remain on the uptrend while investors see the CREATE Law as not enough to help listed firms hurdle their pandemic-related problems.
“Next week, we still see a downward bias for the local market as our COVID-19 situation continues to worsen. The continuous surge in our COVID-19 case count is seen to weigh on the market due to its negative impact on consumer and business confidence,” said Philstocks Senior Analyst Japhet Tantiangco.
He added that, “Investors are expected to watch out for the government’s decision on the quarantine measures in the NCR plus after April 4. The rising pace in the daily increase of COVID-19 cases however raises the possibility that the enhanced community quarantine will be maintained.”
Thus, Tantiangco said “if the enhanced community quarantine is maintained, we may see a negative reaction from the local market.”
Online brokerage firm 2TradeAsia.com said “the government’s economic team estimated that about P2.1 billion in income per day is lost during stricter ECQ status, which does not bode well for corporate earnings and capex and, by extension, market sentiment.”
While the signing of the CREATE Law managed to slightly appease agitated investors last week, 2Trade Asia.com said “we maintain that this is not the light at the end of the tunnel that most investors are imploring, but is simply a reprieve while more concrete progress on the vaccination front is achieved.”
“At the end of the day, tax rates are still computed off of the income tax base, and lower rates can be much more meaningful to valuations if incomes are no longer impaired by lockdowns,” the brokerage said.
Meanwhile, Tantiangco said “Investors are also expected to take cues from the March consumer price index data. A further rise in the inflation rate is seen to add to the downside risk of the market.”
With these expectations, 2TradeAsia.com said “Expect pivots from recovery plays back to defensives plus lower participation while the market rides out the lockdowns.”
2TradeAsia.com advises investors to “recall strategies that have worked in the past year (dividend plays, bargain hunting blue-chips) that yielded strong results.”
BDO Chief Market Strategist Jonathan Ravelas warned, the PSEi’s close last week at 6,443.09 “signals the market could test the 6,000 to 6,300 levels in the near-term. A break below the 6,000 levels will open the test of the 5,700 levels.”
Based on the market’s behavior last year, Abacus Securities Corporation chose stocks that are significantly below historical valuations and not too far from their lowest level in the past year.
Abacus recommended list of stocks as they meet this criteria: BDO Unibank, Metrobank, Metro Pacific, LT Group, Puregold, Robinsons Land, D&L Industries, First Gen, Century Pacific Foods, EastWest Bank, ICTSI, and IMI.
Meanwhile, COL Financial has a BUY rating on GT Capital as it is trading at 8.3 times its estimated earnings per share for 2021 as against its historical average price to earnings ratio is at 15 times. Current discount to net asset value also remains near its historical high at 52 percent.
“While the negative sentiment could keep prices depressed in the short term, we believe that these challenges are transitory and that fundamentals remain attractive over the long term,” COL said.
COL is recommending GMA Network after it declared dividends of P1.35 a share which is well above expectation and the highest cash dividend that the company has declared since its listing date in 2007.
Based on current price, this translates to a dividend yield of 18.0 percent.
Philstocks Financial Research Associate Claire Alviar also recommends investors to buy GMA7 and sell it on ex-dividend date.
“Investors could take this opportunity to have a dividend yield much higher than the current inflation and interest rates. Aside from that, with the high dividend yield, we are expecting its share price to surge as demand may increase as well,” she said.