Stocks to take cues from earnings, GDP

Published May 10, 2021, 6:00 AM

by James A. Loyola

Trading this week will be influenced by the release of economic data, including the much-awaited gross domestic product (GDP), as well as more first quarter earnings reports.

“Market sentiment may still have a bearish bias as investors continue to adjust their economic recovery expectations, from a fast and robust to a gradual and challenging one, in light of the recent developments in our COVID-19 situation and quarantine measures,” said Philstocks Financial Senior Analyst Japhet Tantiangco.

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

He noted that, “Investors are expected to watch out for the first quarter 2021 GDP figures to determine where the economy is coming from as it moves into the second quarter which is seen to be relatively tougher so far due to the stringent social restriction measures in the NCR Plus.”

Tantiangco said “Investors are also expected to watch out for the government’s decision on the NCR Plus’ quarantine measures after May 14. Easing of restrictions or cues that would point to such may spur optimism. Keeping the MECQ however is expected to amplify the bearish sentiment.”

Aside from this, he said “investors are expected to look towards the Bangko Sentral ng Pilipinas’ policy rate decision as well as clues that they may provide on where inflation could be headed moving forward in their May 13 Monetary Board meeting.”

“Foreign direct investment (FDI) flows and GDP growth data are expected to lead headlines in the coming week,” said online brokerage firm 2TradeAsia.com.

It added that both are critical numbers on regular days, but more so now in light of pandemic uncertainties.

GDP consensus is at -5 percent to 2 percent, while 2Trade estimates are on the conservative side (-4.4 percent, downgraded from -2.7 percent).

 It noted that, “a more meaningful rebound should materialize in the second quarter (base effect). But any indication that output, especially on the consumption side, has turned for the better, will be reflected in valuations.

2Trade further said index heavyweights will continue releasing earnings reports for the first quarter and this should spark some volatility towards blue chips, especially in the context of last week’s turnover slide.

“If recent announcements are of any indication, positive results are to be expected, with emphasis on capex restart stories, heading into the second half.

 The brokerage noted though that the PSEi has retraced towards the critical 6,000 psychological support despite overall rebound in earnings.

 “This recent slide implies that the market is expecting another round of earnings downgrades, which is unlikely given how deep earnings bottomed out in the second and third quarters last year,” 2TradeAsia.com said.

Thus, it advised investors to “Take a chance on bruised stocks that exemplify this ‘mispricing.’” 

BDO Chief Market Strategist Jonathan Ravelas said last week’s close at 6,258.71 “signals the market’s continued march towards the 6,000 levels is gaining momentum.”

“Should this decline accelerate in the coming days, it could put the 6,000 levels to the test and if it breaks, this could put the 5,700 levels at risk. However, should the 6,000 levels hold expect a sizable bounce towards the 6,500-6,700 levels in the near term,” he added.

Abacus Securities Corporation is advising investors to accumulate Vista Land & Lifescapes shares as a laggard play, noting that it is trading a less than half its net asset value.

 It noted that Vista Land’s margins are stable while its malls have an operational gross floor area of 95 percent despite the pandemic with its affiliates, most of them in the essential sector, account for 70 percent of their mall GFA.

Meanwhile, top online brokerage firm COL Financial has BUY rating on URC despite the challenges brought about by the COVID-19 pandemic, as it managed to hold its ground with notable market share gains and effective cost control efforts.

“Furthermore, the continued reopening of the global economy bodes well for the company’s international business,” COL said.

The firm also has a BUY recommendation for Semirara Mining and Power Corporation due to the rebound in its coal business.

“Despite the poor outlook of its power generation business due to unplanned outages, we believe that much of the negative news is already priced-in. Meanwhile, the selling price of coal have already recovered. If the higher coal price is sustained, this will improve the earnings outlook of SCC’s coal mining business going forward,” COL said.

COL is also recommending D&L Industries after it posted a strong first quarter performance. It noted that the stock is the trading at only 4.8 times 2022 estimated earnings, below the industry average of 12.6 times.

 
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