Stocks hinge on new quarantine status

Published June 14, 2021, 7:00 AM

by James A. Loyola

This week, local stock market will be waiting for the announcement on whether quarantine measures will be eased further, especially in the nation’s capital, while also observing if the government can speed up its vaccination program.

“Investors are expected to watch out for the government’s decision on the quarantine classifications of the NCR Plus and the MECQ-placed areas of the country after June 15,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.

He added that, “Easing of the restrictions may generate positive sentiment in the market since it would allow more of the country’s productive capacity to be utilized which in turn would help in our economic recovery.”

Tantiangco said “Investors are also expected to watch out for developments with respect to our country’s COVID-19 vaccination campaign. If signs are seen that the vaccination drive is speeding up, then the positive bias seen in the market this past trading week could be sustained.”

Online brokerage firm 2TradeAsia.comnoted that, “Fortunately, (last) week marked the delivery of the highest number of COVID-19 vaccine shots, bringing the national supply to over 12.5 million doses.”

“This covers 9 percent of the population needed to be vaccinated for herd immunity status, which is expected in 2022-2023 (interpolated at current daily rate),” it added.

According to 2TradeAsia.com, what’s good is that “the market (seems) to have priced-in most of the negatives on the macro front (GDP downgrades, weak labor market, among others). Gyrations moving forward will likely be tied to the reopening story, heading into an election year.”

It warns though that, “Some level of skepticism should be expected soon—after all, should the PSEi hit 7,000-7,200, it will be trading at 16-18 times earnings. Is this level of confidence healthy?”

First semester earnings will be available soon, and 2TradeAsia.com said this “should put more color into expectations, but if corporate guidance and a anecdotal evidence on the streets are to go by, 2022 seems more ‘2019’ than ‘2021’.”

BDO Chief Market Strategist Jonathan Ravelas said “last week’s close at 6,907.79 signals the market is quite overbought and could trigger some profit-taking. Continue to expect the market to range between the 6,700-6,950 levels in the near-term.”

Since it remains to be seen if the PSEi’s rally can be sustained, Abacus Securities Corporation is advising investors to focus on laggards such as BDO Unibank and Metrobank since the worse is over for the

banking sector but the share prices of the two banks remain well below their historical valuations.

“They are both well-capitalized and are in prime position when loan demand recovers,” it noted.

Abacus also favors Robinsons Land, Vista Land and AllHome since the first two registered better than expected results in the first quarter, in contrast with the poor results of other real estate firms.

“RLC even saw an improvement in office occupancy levels (whereas others saw significant declines) while Vista Land showed the most resilience in terms of mall revenues,” it added.

Meanwhile, Abacus said “AllHome’s recovery from the pandemic has been as good as, if not better than Wilcon’s. Despite this, AllHome’s share price is down 31.5 percent since the start of 2020 whereas Wilcon’s is already up 6.3 percent.”

“This differential of close to 40 percent has led to a very wide gap in valuations between the two and AllHome is currently the cheapest home improvement stock in the region,” said Abacus.

 Philstocks is also recommending Meralco as another laggard play, noting that “the company is currently bucking the trend of the PSEi. It is moving sideways while the market is going up. Once the market had stable support and continues its uptrend movement, we expect this stock to follow as well.” 

“Fundamental-wise, it is one of the defensive stocks in the market given its nature of business where demand remains despite the challenging economy,” said Philstocks Research and Engagement Officer Claire Alviar.

She added that, “We expect its earnings to recover along with the economic rebound particularly if the demand in the corporate would rise.”

 
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