This week, the Philippine stock market will be looking for cues from corporate earnings reports and government announcement of inflation and employment data but these will be weighed down by the imposition of a lockdown amid the coming Chinese ghost month.
“The local market is still seen to move with a downward bias next week as investors price in the economic losses brought by the tightening of restrictions in the National Capital Region,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
Online brokerage 2TradeAsia.com said “Employment and inflation numbers will trickle in early August but both are expected to stand in the shadow of Metro Manila being placed under the strict quarantine scheme (ECQ) from August 6 to 20.”
Tantiangco explained that, “Another round of enhanced community quarantine in the NCR from August 6 to 20 is seen to further limit both household consumption and business activities in the said region which is the biggest contributor to our GDP.”
This in turn is expected to lead to more economic repercussions including jobs and income losses, as well as a decline in business and consumer confidence.
“Investors are also expected to monitor the daily COVID-19 case counts amid lingering worries over the Delta variant. A sustained surge in COVID-19 cases, and a detection of more cases with the Delta strain is seen to aggravate the pessimism,” he added.
“While some of the risk may have already been priced ahead, from a market standpoint, fundamentals have again tilted to the downside,” said 2TradeAsia.com.
It added that, “Participants have to brace for gyrations that will be likely tied to caseload spikes or improvements during the 2-week lockdown as this will drive speculation for an extension of the ECQ to September, and the government's stimulus plan, if any.”
“Thinner volumes and a lack of a sparkplug usually characterize ‘Ghost month’ trades and, with the Delta variant haunting investor psyche, expect participant, to stay guarded, a least until the next policy on lockdowns become more visible,” 2TradeAsia.com said.
Abacus Securities Corporation is upbeat on GT Capital on the back of its strong performance, particularly for Metrobank and Toyota.
“Despite GTCAP's stronger than expected results in the first quarter, the stock price is down 5 percent year-to-date. We upgrade the stock to a Buy and our target to P674, but we would wait at lower levels, given anemic market sentiment and rising odds of a third wave,” it noted.
It also likes Wilcon Depot after the firm sustained its earnings performance growing both year-on-year and slightly quarter-on-quarter with first half 2021 net income already 53 percent of consensus.
Abacus noted though that, “We prefer to come in at lower levels as we maintain our target price at P21.”
The brokerage pointed out that, “we believe WLCON can still sustain its performance despite stricter quarantine measures as seen in the second quarter of 2021 when April was recognized as the worst month of 2021 and still netted a flat quarter-on-quarter net sales.”
Meanwhile, COL Financial has a BUY rating on China Banking Corporpation as it expects the bank’s lending business and fee-based revenues to pick up as economic growth rebounds.
“Moreover, we continue to like the bank’s low exposure to consumer loans at 20 percent of total loans versus the median exposure of other smaller banks at 30 percent,” it added.
It explained that, “we view auto, credit cards, and SME segments to be the most at risk in asset quality during this pandemic.”
“Although we expect net interest margin to be pressured as loans gradually re-price amid the low interest rate environment and excess liquidity in the system, we believe most of the negatives have already been priced in,” COL said.