Investors will be watching out for signs if Santa Claus will be visiting the local stock market in the last two weeks of trading when the index often rallies before 2021 ends due to positioning for the new year.
“Recovery was a major plot-point for equities in 2021, and is likely to spill over to 2022, only without the help of base effects and bumpy operations from lockdown policies,” said 2TradeAsia.com.
It noted that, “Technically, the index has strong likelihood to simply hover above the 7,000 level; possible spoilers from Typhoon Odette can tilt the odds to the downside, but as the curtains close on 2021, expect funds to snipe for bets in ‘sunrise sectors' in 2022, such as retail, real estate, and banking.”
The brokerage added that, “The year's final weeks of trading are likely to put participation in near-limbo (per usual), with the occasional knee-jerk reactions from Typhoon Odette and omicron variant headlines. Expect stronger trades to be based on 2022 already.”
Abacus Securities Corporation said that, “Looking at monthly returns data for the PSEi from 1989, we found that December performs better than the average for the other months of the year 65 percent of the time, whether this be due to window dressing, holiday spending, or year-end bonuses adding liquidity for retail investors.”
“This year may be the same as we can add the lifting of quarantine restrictions to this list...as the index has largely reclaimed what it lost from the discovery of the Omicron variant,” it added.
COL Financial also said that, “Historically, the PSEi has performed well during the last two weeks of the year. This phenomenon is colloquially referred to as the Santa Claus Rally.”
“The market breather, paired with the overblown omicron fears, provide a perfect setup for the much-awaited Santa Claus Rally. Moreover, many individual stocks showed strong bounces from key support levels following the sell-off,” it noted.
With the Omicron fears subsiding, COL expects the prices of these individual index stocks to continue to recover, which should result in the Santa Claus rally to end the year.
“Investors can look to participate in large cap PSEi stocks that were sold-off during the omicron driven market correction. These stocks include ALI, AGI, AP, BDO, GTCAP, RLC, RRHI, which have all seen some decline from their recent highs. In addition, a majority of these stocks are trading at significant discounts to their fair value,” it advised.
Meanwhile, COL said the relaxation of foreign ownership restrictions for the telecommunications sector will benefit DITO the most as subsidiary Dito Telecommunity would now have more options on how to fund its huge capex requirements.
China Telecom, Dito Telecommunity’s strategic partner, already owns 40 percent of the telecom asset, which was previously the limit for foreign entities.
“As such, DITO now has the option of allowing China Tel to own a larger chunk of the business should this be beneficial for the company. Although DITO’s stake in the telco asset will be diluted, funding its operations during the next few years should be less of an issue given China Tel’s financial muscle,” said COL.
Converge should also benefit from the relaxation of the foreign ownership limit as this will result in an increase in the stock’s foreign free float market capitalization.
Now that foreign investors can own a bigger chunk of its shares, COL said there is a stronger likelihood that the stock will be included in the MSCI index in the next index rebalancing date.
“PLDT and Globe could also see higher index weightings in the MSCI index following this development. This could lead to increased liquidity in both stocks, making them more attractive to foreign investors,” it added.
Abacus is also looking at Fruitas Holdings after it disclosed that its November sales have now surpassed its November pre- pandemic 2019 sales.
“Our view, ...is that the development is quite appealing as it is becoming clearer that the company's topline efforts in building community stores, closing unprofitable kiosks, and F&B brand acquisitions are now paying dividends. While the company has yet to yield an impressive bottom line in the past quarters, we believe the company will benefit from the anticipated reopening of the economy,” it noted.