The local stock market is seen to fall lower this week as the number of new COVID-19 cases continued to rise—raising the specter of an enhanced community quarantine which had almost grounded the Philippine economy to a halt last year.

“The local market may extend its decline next week as our COVID-19 situation worsens which in turn clouds our economic outlook,” said Philstocks Financial Senior Analyst Japhet Tantiangco.

He noted that, new COVID-19 cases have already hit an all-time high and additional restrictions have been implemented including the suspension of operation of some non-essential businesses, curfews, and granular lockdowns.

“These are expected to weigh on our still struggling economy. With this, we may see negative sentiment dominate the market next week,” Tantiangco said.

Online brokerage firm 2TradeAsia.com said “History may not always repeat itself--but it often rhymes, and a continued rise in COVID cases refuels past fears and spurs volatility.”

Tantiangco added that, “Aside from our COVID-19 situation, investors are expected to monitor still, the movement of the US bond yields. A further rise in the said yields is seen to cause more selling pressure in the local market.”

“While the Bangko Sentral ng Pilipinas is widely expected to simply follow the Fed's decision to keep policy rates low, watchers will be keen to hear the Board's policy strategy in the medlum-to-long-term, given the unique challenges the local economy is experiencing,” said 2TradeAsia.com.

It explained that, “inflation, while likely transitory, is problematic to an already depressed labor market and growing demand for intervention via fiscal or monetary stimulus will play a part in the BSP’s next moves.”

The brokerage also noted that, the country is not faring well in combatting COVID-19 and this has impaired foreign inflows.

Thus, it advises investors that, “As the country continues to grapple with the pandemic, expect risk-off trades to prevail, but recall one of the most profitable lessons of 2020: value and dividend plays work.”

BDO Chief Market Strategist Jonathan Ravelas said “last week's close at 6,436.10 signals the market could still test the 6,000 to 6,300 levels in the near-term” and “any pullback, if any, is limited towards the 6,500 to 6,700 levels.”

Abacus Securities Corporation noted that, “From a mini-peak on March, the PSEi has fallen 5.5 percent… The sell-off, however, appears indiscriminate which may be an opportunity to pick up a few names for those that are patient enough to hold for the longer term.”

Among these is Puregold which is one of the worst performing index members during the period even though  “This is unwarranted given that rising Covid cases means people will be less inclined to go out. They will eat more at home which means pantry restocking to an extent that may be similar to what we saw last year. Moreover, consumer staples, which account for most of grocery sales, are less affected by rising inflation.”

Abacus also cited Robinsons Land Corporation even though mall operators are likely to be affected by the current rise in Covid cases as people refrain from going out.

“A greater percentage of RLC's malls are located in provincial areas compared to its peers. Given that the hike in Covid infections is concentrated in Metro Manila, then it should perform better in the current environment,” it explained.

Meanwhile, COL Financial has a BUY rating on Philippine National Bank since it will benefit as economic growth recovers amidst the arrival of the vaccines.

“Although we believe provisions will remain elevated this year in light of its low NPL cover of ~43 percent, we believe it has the room to book these provisions given that it has yet to revalue its three prime properties. Overall, we believe that the negatives have already been priced in,” it added.

COL has also upgraded Aboitiz Equity Ventures to a BUY rating given the expansion plans of its power subsidiary Aboitiz Power.

“AEV is also well positioned to benefit in the government’s infrastructure programs owing to its investment in republic cement as well as its strong balance sheet and excellent track record in acquiring businesses,” it said.

COL noted that, “The share price of AEV is also becoming increasingly attractive due to the recent decline.” 

Philstocks Research Associate Claire Alviar also sees an opportunity to buy Manila Electric Company because it is a fundamentally strong defensive company that investors can hold for the long term.

“In spite of the Covid-19 pandemic impact in the country, we see that Meralco would still be in business as usual as demand remains,” she said citing the company’s annual dividends. Despite the challenging period, Meralco kept its core dividend payout ratio at 50 percent in the first half of 2020.