The local stock market will be looking forward to the government’s decision on whether to loosen quarantine restrictions or not, although investors seem to be more upbeat now and are positioning for the long term.
“How the market would close could depend on the social restriction measures to be implemented in the National Capital Region after September 15, 2021,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He noted that, the government is aiming to test their new social restriction measures with alert levels and granular lockdowns in the NCR starting September 16.
“If the new measures push through on the 16th and if on the implementation, the social restrictions in the NCR would be eased, then it may spur positive sentiment in the market,” Tantiangco said.
He added that, “Maintaining the tight measures in the NCR however is expected to lead to disappointment which could pull the local bourse down. Till the final decision, investors are expected to watch out for clues on how the restriction measures will be.
Tantiangco said investors may also watch out for the upcoming July overseas Filipino Workers’ remittance data.
Online brokerage 2TradeAsia.com said last week’s rally was “interestingly consistent... despite the government deferring to MECQ-policy for September lockdowns, which was earlier communicated to be relaxed.”
“After all, such circumstances tend to erode business confidence as inputs, especially labor and fixed costs, are frontloaded in anticipation of lockdown measures (therefore increasing the cash burn expected for September). The climb to almost-7,000 seems to ignore this,” it noted.
The brokerage added that, “In our view, this is less of the market decoupling from lockdown measures, and more of investor psyche gearing up for more long-term aspirations.”
This is because corporate correspondence so far has indicated elevated capex levels for the next quarters plus improved pull-forces as election spending kicks in by early 2022.
“A crucial retest to 7,000 will be on the table for the upcoming sessions, which prods keeping a tight monitor of volume flows to maximize exposure to a potential technical breakout. Range trade,” advised 2TradeAsia.com.
AAA Equities Head of Research Chris Mangun said“The PSEi is just a few points away from the 7,000 key-level, which is its inflection point. The market's movement in the coming days will determine its trajectory in the medium to long term.”
He added that, “This is also the case for the economy and the handling of the pandemic response. We are at a ‘make-or-break’ moment in terms of the economic recovery and the health crisis management.”
Thus, mangun said “Stock valuations may continue higher if the PSEi successfully breaks above the 7,000 key-resistance level in the coming sessions. Nonetheless, we advise investors to lighten positions as individual issues approach their respective resistance levels.”
BDO Chief Market Strategist Jonathan Ravelas said last week’s close at 6,924.02 “signals the market still has some gas to trythe 6,900 to 7,000 levels in the near-term. Failure to test said levels couldtrigger some profit taking.”
As investors look to the horizon, COL Financial advises them to buy strong performing stocks by focusing on companies whose earnings are already recovering and are on track to match, or even exceed, pre-pandemic levels this year or next.
“Also, make sure that the stock is cheap and is not yet trading above its pre-pandemic level. That way, the risk for disappointment is lower and capital appreciation potential is greater,” it added.
COL said that, among the portfolio of stocks it favors PLDT, Puregold Price Club, GT Capital, D&L Industries, Metro Pacific Investments Corporation, Monde Nissin, and Aboitiz Power Corporaiton fit the said criteria.
Meanwhile, Abacus Securities Corporation is recommending a trading buy on Ginebra San Miguel Inc. as it is lagging behind other liquor companies even as sales of all four companies have surged during the pandemic.
“Our impression is that GSMI has significant runway remaining. Its current market share is still well below the peak and consumer trends remain in its favor. Its market share, for example, expanded further since the pandemic began because gin is mostly consumed off premises or at home,” it noted.
While Ginebra probably won't be able to sustain its blistering profit compounded annual growth rate of of more than 60 percent in the past 3 years, Abacus said “we believe more moderate growth of 15 percent to 20 percent is quite doable.”
At this rate, 2022 earnings should be between P16.00 to P17.00 per share which means the stock is only trading at 6.5 times for next year.
“And even if we only use 9 times as our target P/E...GSMI should be worth P144 to P153 per share,” it concluded.