Temporary relief seen despite risk aversion

The local stock market lost about P1.6 trillion of its valuation last week as the COVID-19 pandemic triggered a massive selloff that dragged down the main stock barometer by 14.42 percent.This week, investors expect to find some relief even as risk aversion remains high.

The Philippine Stock Exchange index (PSEi) lost 976.44 points during the week to close on Friday at 5,793.94, diving deeper into bear territory. Since its introduction during the US-epicentered global financial crisis in 2008, the PSE’s circuit-breaker, which applies a 15-minute break when the PSEi falls by 10 percent, was triggered for two sessions in a row for the first time in history. After a trading halt on Friday, however, the PSEi reversed early losses.

“PSEi’s ability to eke out a 1-percent gain after falling by as much as 10.3 percent last Friday indicates bulls are at least temporarily back in the market. Additionally, positive sentiment from the United States as seen in the 9-percent jump in the US equities markets [on Friday] will likely spill over to the local scene,” said Ron Acoba, chief strategist at equities research provider Trading Edge.

“Make no mistake, though, since we are already in a bear trend, rallies are expected to be just temporary,” he added.

Acoba said the PSEi’s possible retracement levels would be at 6,200, 6,600 and 7,000.

Jose Vistan, head of research at AB Capital Securities, said the coronavirus scare would continue to affect economic and market activities this week.

“Volatility will still prevail as a bottom base is still evasive. We are seeing attractive prices already relative to net asset values and yields. However, earnings could take a drastic rescripting due to the COVID-19 pandemic. The government’s precautionary quarantine will reduce economic activity and take a hit on our GDP (gross domestic product) projections,” he said.

One clear and obvious variable that can indicate the bottom is the successful discovery of a vaccine against the dreaded COVID-19, Vistan said. “Sadly, we don’t know the odds of such. China and Korea are showing signs of containment but the problem seems to be worsening in Europe and in the United States. We continue to advise clients to remain defensive instead of trying to catch a bottom,” he said.

The worst hit PSEi companies last week were Semirara and Robinsons Land Corp. Semirara slid by 34.29 percent last week to close at P12.80, while RLC lost 26.18 percent to close at P17.20.

Net foreign selling last week amounted to P3.74 billion, bigger than P2.4 billion in the previous week. Since the start of the year, about P22.2 billion worth of funds flowed out of the market.

The local stock market ended last week with a market capitalization of P10.55 trillion versus P12.16 trillion in the previous week. The P1.6-trillion decline in market capitalization last week was equivalent to about 8.5 percent of the Philippine domestic economy.

BDO Unibank chief strategist Jonathan Ravelas said investors were cashing in their portfolios in favor of cash as confidence waned due to rising COVID-19 cases in the country. INQ