The stock market is seen to continue to be weighed down by the country’s COVID situation while investors will also be taking cues from the April inflation figure and corporate earnings announcements.
“Next week, we still see a downward bias for the local market as we expect clouded economic recovery prospects to continue weighing on investor sentiment,” said Philstocks Financial Senior Analyst Japhet Tantiangco.
He noted that, “While some compromises have been made in favor of the food service and personal care industries, the extension of the MECQ in the National Capital Region Plus is still seen to lead to losses that will deepen the damage already inflicted to the economy by the preceding stringent social restriction measures imposed.”
“Overall, sentiment towards the market is seen to remain pessimistic as the strength and pace of our economic recovery is challenged by the business closures, worker lay-offs, and income losses caused by the reimplementation of the strict quarantine measures,” said Tantiangco.
He also pointed to signs of acceleration in the increase of commodity prices which is seen seen to weigh on the country’s economic recovery prospects.
“Thus, investors are expected to look towards our April consumer price index data. A rise from March inflation’s 4.5percent may also induce selling in the local market next week,” said Tantiangco.
Meanwhile, 2TradeAsia.com said the “inflation print for April is crucial for the second quarter as this will set the tone for the Bangko Sentral's monetary policy move on May 13.”
It noted that, “while March broke the uptrend, it remains elevated and, in fact, ahead of the 2.4 percent comfort range. April is the wildcard: pull inflation is expectedly lower due to ECQ reimpositions in key economic centers, but push factors are higher, owing to the dry season (higher power and agri input costs).”
“A continued slight break (4-4.5 percent) should telegraph stasis, which is what markets can hope for the most in these trying times,” 2TradeAsia.com said.
Aside from this, Tantiangco said investors are expected to look towards the daily additional COVID-19 cases and first quarter 2021 corporate earnings for cues.
“As the broader market remains directionless owing to immaterial improvement in the COVID-19 caseload, trades remain tight and mostly stock-specific,” said 2TradeAsia.com.
It added that, “Expect industrials to gyrate in the upcoming week, as leaders report first quarter earnings… and while slightly upbeat quarter-on-quarter figures are likely, brace for near-term reluctance to ‘step on the gas’, so to speak, as full economic reopening remains a question mark until at least the latter end of the year.
BDO Chief Market Strategist Jonathan Ravelas said last week's close at 6,370.87 signals the market’s continued march towards the 6,300 levels.
“A break below said levels could accelerate the decline towards the 5,700-6,000 levels in the near-term,” he added.
COL Financial has a BUY rating on Philippine National Bank after it announced a property dividend which is seen to unlock the value of its prime properties.
“Although we believe provisions will remain elevated in light of its low NPL cover of 43 percent, we believe it has the room to book these provisions given its plan to monetize its three prime properties,” COL said.
Abacus Securities Corporation estimates the value of the property dividend (shares of PNB Holding Corporation which owns the three prime lots) at P15.60 per PNB share.
With plans to list PNB Holdings, Abacus noted that most property dividends listed by way of introduction saw a surge in their share prices on listing day.
Meanwhile, COL also has a BUY rating for Aboitiz Equity Ventures “given the expansion plans of its power subsidiary AboitizPower. AEV is also well positioned to benefit in the government’s infrastructure programs owing to its investment in Republic Cement as well as its strong balance sheet and excellent track record in acquiring businesses.”
COL also favors China Banking Corporation as its lending business and fee-based revenues are expected to pick up in 2021 as economic growth rebounds.
“Moreover, we continue to like the bank’s low exposure to consumer loans at 20 percent of total loans vs the median exposure of smaller banks at 30 percent. Recall that we view auto, credit cards, and SME segments to be the most at risk in asset quality during this pandemic,” it noted.