Top local online brokerage firm COL Financial has reduced its year-end target for the Philippine Stock Exchange index but remains optimistic about the market’s recovery despite risks posed by the Delta variant.
In a virtual press briefing, COL Chief Equity Strategist April Lynn L. Tan said “we have slightly reduced the target to 8,100 from 8,300 mainly because of the Property sector since malls be affected by the enhanced community quarantine.”
While the PSEi is currently threading below the 6,500 level, Tan said they are optimistic of a strong recovery given that inflation has peaked, corporate earnings are recovering, and the negatives have been priced in.
She noted that, these negatives include data that shows the PSEi as the worst performing in ASEAN this year as it is one of the worst hit by the pandemic despite having the longest and strictest lockdown.
The Philippines also has the slowest economic recovery and highest inflation as wel as the slowest vaccination rate. However, Tan said government’s vaccination program is efficient given the inadequate amount of vaccine it has managed to secure so far.
However, Tan said orders for more vaccines have been made and the country will soon have procured a total of 157 million doses—enough for 71 percent of the population.
With its higher vaccination rate, the National Capital Region is seen to recover faster than the rest of the country even with the Delta variant.
With the NCR being the top contributor to the Philippine economy, its recovery is seen to address a credit downgrade rating risk.
Comparing to India’s experience with the Delta variant, Tan pointed out that their stock market declined by only 8.5 percent but fully recovered in just two months.
COL Chief Investment Strategist Marvin Fausto said that, investors should look at any drop in the market as an opportunity to buy cheap stocks in anticipation of the expected recovery.
He cited a COL survey of 2,000 of its clients which showed that a large majority remain invested in the stock market and a higher number (compared to early this year) intend to maintain their stock exposure.
Meanwhile COL Chief Technical Analyst Juanis Barredo said the market’s “recent oversold levels may allow for some rally time (6,600 to 6,700).”
He added that, “Some headwinds still show – but such should only delay the recovery swing. We should look for technical openings for the economic re-opening.”
Barredo said that, “If an ECQ shock comes, take the chance to slowly buy into transitory weakness.”