Stock market wary of COVID, jobs data

Published June 7, 2021, 6:30 AM

by James A. Loyola

Investors in the local stock market will be closely watching the COVID numbers after the easing of quarantine measures in the nation’s capital while also waiting for the release of employment this week.

“Next week, the local market may decline if our country’s COVID-19 situation further relapses. For this week so far, our new Coronavirus cases have averaged 6,459 per day, higher than the prior week’s average of 5,716,” said Philstocks Financial Senior Analyst Japhet Tantiangco.

He added that, “The COVID-19 situation in the National Capital Region Plus has shown signs of regressing while those in other regions have worsened.”

“If this continues, the risk of the re-imposition of (more) stringent quarantine measures in more areas of the country is seen to rise which in turn is expected to weigh on market sentiment,” Tantiangco explained.

He noted that, “Aside from this, the market is also seen to take cues from our upcoming economic data next week, primarily our April Labor Force Survey.”

Online brokerage firm said “the market will be putting extra premium on employment data… (as) not only will it confirm the magnitude of the labor force’s recovery (from April 2020 peak unemployment rate of 18 percent) but also reassure market confidence that consumption-driven fundamentals are intact.”

“After all, the makeup of the PSEi is primarily cyclical, and wage preservation, if not growth, will be a key factor in determining whether the possible run-up to 7,000-above has legs,” it added.

Meanwhile, said investors will also be concerned about the May inflation rate of 4.5 percent as “This raises concerns for stagflation—that is, a period of stagnant economic expansion, but high levels of inflation.”

It noted though that,”In the grand scheme of things this scenario is unlikely with prices cooling in the next 2 to 3 quarters.” 

After the recent surge in stock prices, warned that, “A rising tide does not come by every day, thus healthy corrections from time to time should be expected given the velocity of the recent ascent; this is also true especially as the index retests the critical 7,000 zone.”

“In that case, range-trading may be optimal for now, but note of laggards whose valuations have been late to the party and may offer higher alpha in the long-term,” it added.

BDO Chief Market Strategist Jonathan Ravelas said last week’s close at 6,796.34 “hints near-term top could be in place at the week’s high of 6,841.68. Continue to expect the market to range between the 6,500-6,850 levels in the near-term.”

Abacus Securities Corporation has a BUY rating for both Philippine National Bank and its parent company LT Group as both stand to gain from the revaluation of PNB’s idle but prime real estate assets.

“PNB will recognize a gain amounting to P34 billion in the second quarter from the property-for-share swap involving its P47 billion prime assets and PNB Holdings Corporation shares,” Abacus said.

It added that, “Post property dividend distribution of PHC, this will lead to a fair value of about P34per share for PNB, but may take some time to materialize.”

Meanwhile, it noted that, “LTG stands to recognize around P19 billion from PNB’s gain on sale from the property-for-share swap. Also, we expect synergies between PHC and Eton, which would help crystallize the value of the latter for shareholders.”

COL Financial is still bullish over the prospects of the telecommunications sector and has a BUY recommendation for all three listed players PLDT, Globe Telecom and Converge.

It note though that, based on first quarter results, PLDT and Converte met expectations while Globe “delivered poor quality earnings growth.”

“The three telco operators are maintaining their positive outlook for the rest of the year as more subscribers go online and increase their data usage,” COL said.

PLDT expects service revenues to grow by high-single digit while Globe expects “low-to-mid single digit topline growth, even as its non-data related revenues continue to hamper growth.”

“For Converge, it is expecting to reach its year-end target of 1.6 to 1.7 million subscribers, which should translate to strong revenue growth for the remainder of the year,” said COL.

It said that, “We believe that (consumers’) dependence on stable and fast internet connection will continue to drive growth for all telcos. Moreover, we like the telecom sector due to its significant growth potential given the underpenetrated fixed broadband segment.”