Dark clouds loom over the horizon this week as stock market investors brace for a second quarter economic report that may reflect deeper economic contraction, compounding jitters over the unabated COVID-19 contagion.
Last week, the main-share Philippine Stock Exchange index (PSEi) added 67.51 points or 1.15 percent to close on Thursday at 5,928.45.
Another P2 billion worth of foreign funds flowed out of the stock market last week, while average value turnover remained below P5 billion.
“The local market is seen to drift lower in the coming week with the second quarter gross domestic product report acting as a major catalyst,” said Ron Acoba, chief investment strategist at Trading Edge Consultancy.
The government is set to release the second quarter GDP report on Aug. 6. Based on consensus derived by Bloomberg, the market was expecting a year-on-year decline of 9.7 percent from the 0.2 percent year-on-year contraction in the first quarter. Two quarters of contraction means the country may have entered a recession.
“With the daily COVID-19 cases still posting, consumer demand will likely remain tempered. As such, sentiment toward risk assets will likely be muted,” Acoba said.
Acoba sees the next support at around 5450.
“I’m not expecting a sudden drop, as we saw in March. I’m expecting a gradual descent toward the said handle,” he said.
Online stock brokerage COL, for its part, adjusted its fair value estimate after factoring in lower interest rates and rolling over from 2020 to 2021. For 2021, COL forecasts the PSEi’s earnings per share to rebound by 31 percent after falling by 24 percent this year as profits recover from the negative impact of lockdown measures.
Nevertheless, COL sees 2021 earnings still facing downside risk as earnings visibility remains poor “given that the government only recently began to reopen the economy and that the number of COVID-19 infections continue to rise.” INQ