Quarantine status, inflation data to dictate stocks

Published May 31, 2021, 6:00 AM

by James A. Loyola

After the unexpected surge in stock prices last week, investors will now be looking forward to the government’s decision on whether to further relax quarantine measures in the National Capital Region and surrounding provinces.

“While maintaining MECQ (modified enhanced community quarantine) is expected, any messaging for easing in the second semester should support the recent rally,” said online brokerage firm 2TradeAsia.com.

Meanwhile, the firm noted that the giant initial public offering of Monde Nissin Corporation will jumpstart the month of June and this “can funnel fund flows away from cyclicals (this) week.”

“Finally, inflation report for May (on June 4) should bring the discussion back to heating prices and the corresponding response by the Bangko Sentral ng Pilipinas,” 2TradeAsia.com added.

While the BSP is expected to sustain its accommodative stance, it noted that “an inflation back to the 2-4 percent range could be the extra push that margin-battered issues need.” 

“The PSE’s strongest week in 2021 proved that money will find its way to assets of value„ especially if they have the staying power in a world post-COVID. Recent turnover build-up implies that the rally has legs; brace for the next wave that, chart-wise, can bring the PSEi above its latest high (7,300),” 2TradeAsia.com advised.

Meanwhile, following the recent disclosures of first quarter results, Abacus Securities Corporation advises investors “to focus on companies that have continued to grow their bottomline despite the pandemic or those that will recover quicker than most.”

“This is why we continue to recommend names like LT Group, Puregold Price Club, International Container Terminal Services Inc., D&L Industries, and First Gen Corporation,” it added. 

For COL Financial, it is recommending investors to buy shares of Vista Land & Lifescapes “as we expect them to continue capitalizing on the current demand trends for horizontal projects.”

“We also like VLL for the resiliency of its leasing revenues during the pandemic,” it noted.

  Abacus also advises its clients to allocate a small portion of their portfolio, as VLL could be a potential laggard play,” and noted “the company has already recorded three consecutive quarters of quarter-on-quarter improvement in reservation sales.”

“On the other hand, rental income was down by only 9 percent to P2.0 billion. This is relatively better than those of other property developers, whose mall revenues dropped by high double-digits. Again, this is attributable to VLL’s tenant mix, as affiliates compose 70 percent of the company’s mall gross floor area,” Abacus said.

COL also has a BUY rating for Jollibee Foods Corporation because “We are encouraged by JFC’s sequential improvement in sales, driven by its international segment. We believe that this will be the main driver of growth over the next few years.”

It also noted that, “Smashburger and CBTL are also showing some green shoots as their profitability continued to improve in the first quarter.”

Abacus also reiterated its recommendation of Puregold and AllHome because “both stocks are clearly mispriced. We see value in them because they have the best earnings compounded annual growth rate among retailers and yet are down 17 percent and 40 percent respectively since the start of last year.”

“Beyond 2022, we also see both companies continuing to outperform in terms of profit growth since they will benefit from higher discretionary spending and continuous household formation,” Abacus concluded.