The local stock market is seen to continue to be plagued by the rapidly rising cases of COVID-19 in the country and concern that it will again lead to the highest lockdown level.
“A continuation of this (rising) trend is expected to further escalate worries over the possibility of stricter restrictions being implemented in the country which would hurt our economy. This in turn may pull down the local bourse,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
“Rising cases of COVID-19 has struck fear again, as policy of re-tightening and renewed lockdowns re-emerge,” said 2TradeAsia.com adding that, “most recent print implies that we have yet to reach peak caseloads.”
It added though that, “while we should not get some false sense of security over omicron, we maintain that vaccination rate remains on track to hit national targets, lessening fears of a full-blown hospitalization meltdown; and business models have had over 2 years of fine-tuning in these scenarios, and valuations are not likely to hit as severe of downgrades as in 2020.”
However, 2TradeAsia.com noted that, “some level of pragmatism in trading is never a bad thing, especially in 2022 when market conditions are fickle and range-bound by factors outside of corporate action.”
Thus, the brokerage said that, “in sectors that have proven themselves resilient from lockdown scares, dips are merely opportunities to make short-term tailspins profitable—as we learned from 2020 and 2021.”
Meanwhile, Tantiangco said that, “offshore, US bond yields have risen following the Federal Reserve’s hawkish signals in their latest minutes of the meeting. If this continues, then it may add downward pressure to the local bourse.”
For 2022, COL Financial forecasts the telco sector’s service revenue to grow and “we remain bullish on the broadband segment of the three telcos as stable internet access has become a necessity under the new normal.”
“We expect broadband revenues of all three telcos to continue their upward momentum, led by the strong demand for fiber,” it noted.
COL added that, “moreover, the recovery of TEL and GLO’s wireless revenues are expected to pick up as people become more mobile amid looser quarantine restrictions and higher vaccination rates.”
While COL reiterates its BUY rating on PLDT, it also reiterated its HOLD rating on Globe because “we believe that the stock is expensive even after factoring in Mynt’s recent revaluation to double unicorn status.”
It also has a HOLD rating on Converge because “the stock is already fairly valued. We recommend investors to wait for pullbacks before buying the stock.”
Meanwhile, COL sees power demand growing in 2022 as the economy recovers from the impact of the pandemic and its top picks among power firms for 2022 are Aboitiz Power, Semirara and Meralco.
“We like AP because we expect its profits to grow by 19 percent in 2022, as the company benefits from the start of operations of the 1,300MW Dinginin Coal Project (unit 1 beginning in 1Q21, unit 2 beginning in 2Q22). Furthermore, valuations are very cheap,” said COL.
COL said it also favors Semirara “since we believe that earnings have bottomed in 2020” and “the stock is still extremely cheap.”
It also likes Meralco because its profitability is least vulnerable to the risks facing the power industry (rising WESM prices, higher coal costs and unplanned outages) because bulk of its profits come from the distribution business.”
Meanwhile, Abacus said there is trading opportunity in Monde Nissin as it may be included in the new PSE index composition next month.
“Traders may take advantage of the opportunity to accumulate on dips and sell when the recomposition is officially announced in either the first or second week of February,” it said.