The local stock market is seen to be weighed down by concerns over the local transmission of the more infectious Delta variant of the SARS-COV2 coronavirus and fear of another surge in new cases.
“The worries caused by the detection of COVID-19 cases with a locally transmitted Delta variant may linger in this week’s trading, said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He noted that, “The local transmission of the Delta variant, which is known to be more infectious, raises the fears of a surge in COVID-19 cases, reimplementation of strict quarantine measures, and eventually, a delay in economic recovery.”
Online brokerage 2TradeAsia.com said that with the Delta variant now in the country, “market participants may have to contend with another wave of pessimism within the next few weeks, seeking for feelers as to how this will impact public health policy.”
It warned investors to “Brace for volatility across asset classes, especially those tied to the country's macro recovery story.”
Tantiangco said that, “Another factor which may negatively affect the market is the weakening Peso as it is seen to discourage foreign investors from parking their funds in the local market.”
“If the Peso declines further next week, then we may see more foreign fund outflows from the market. In light of these, investors are expected to remain cautious,” he added.
Tantiangco added that “At the same time, investors are still expected to watch out for the upcoming second corporate results. Given these, we may still see tepid trading next week.”
According to 2TradeAsia.com, “double-digit positive growth rates are to be expected, mostly on base effects from April-June 2020's stringent lockdown implementation.”
“Unfortunately, we anticipate investors to look past impressive second quarter numbers in favor of guidance for the third quarter within the context of the Delta variant,” it added noting that, “While the tone may not come off as grim as in 2020, re-ratings to the downside are likely to be forthcoming.”
With these, 2TradeAsia.com said “there is little incentive for psyche to move past the 7,000-mark, at least for now; however, where others abandon hope, those who are in equities for this long know that moments of panic tend to be the most profitable. Hedge bets, but take note of value stocks worth picking up.”
BDO Chief Market Strategist Jonathan Ravelas said last week’s close at 6,693.83 “highlights the bears are in control. This signals further tests towards the 6,300-6,500 levels in the near-term.”
For stock buys, COL Financial is recommending Robinsons Retail Holdings Inc. noting that its share price has declined by 15 percent year-to-date, severely underperforming the PSEI.
“The company is also still trading 22 percent lower compared to its pre-pandemic price, despite having good recovery prospects. We think this is not justified given that RRHI is poised to fully recover above pre-pandemic levels next year based on our forecasts,” it added.
COL said that, “In the medium-to-long term, RRHI remains well positioned to capitalize on retail growth opportunities with its diversified portfolio of store formats. Furthermore, growing e-commerce trends bode well for the company given its increased focus on building its online presence.”
Abacus Securities Corporation is also recommending RRHI on the back of the trimming of its portfolio of brands, especially in fashion and the addition of its pet store business which has near and long term potential.
It added that, Google mobility data show that Filipinos are now spending more time at retail and recreation establishments than at any other point of the pandemic.
Abacus said it believes RRHI may outperform in the next 12 months and see an upside of more than 20 percent for the stock.
The brokerage is also favoring MacroAsia Corporation even though it is one of the worst performing stock since the pandemic began.
“The divergence between MAC and CEB is striking despite the fact that their fortunes are essentially tied together. Part of this is due to the troubles at PAL; in particular, the reported Chapter 11 filing,” it noted.
But, Abacus explained that, “the bankruptcy is only related to creditors in the US (specifically plane lessors) and will not affect operations.”
“Nevertheless, the stock price remains closer to its pandemic Low rather than its alt-time high and this, we believe, represents opportunity for investors. Our view is that catering, ground handling and aircraft maintenance will all have largely recovered by the end of next year,” it added.
Thus, Abacus said that, “Since the market is always future-centric, the odds that MAC can double from current levels in 18 months should be quite good. Long term investors may therefore want to buy on dips and build positions slowly.”