Market may extend decline as more earnings report come in

Most investors see no relief for the stock market this week as they brace for the final stream of second-quarter local corporate earnings results and the possibility of the tighter lockdown protocols being extended.

For the fifth straight week, the main-share Philippine Stock Exchange index (PSEi) fell by 1.39 percent last week to close on Friday at 5,846.02.

“I see the market moving within a downward trending channel between 5,700 and 6,100 as it continues to be buffeted by the effects of the pandemic on the economy. While the return to MECQ (modified enhanced community quarantine) was announced to be until Aug. 18 only, there is always the possibility that it will be extended if conditions so warrant,” PNB Securities president Manuel Lisbona said.Last week, it was announced that the Philippine gross domestic product had contracted by 16.5 percent year-on-year in the second quarter, officially putting the local economy on recession after the 0.7-percent contraction in the first quarter. This was the steepest economic decline seen by the country in ages.Another factor to watch is the inflation given the apparent uptrend. The rate for July was slightly higher than expected at 2.7 percent.

“Given that interest rates are in negative territory, the market may get some support as investors will choose to take on more risk in the equity market in search of higher returns,” Lisbona said.

“The next few weeks—mid-August to mid-September, or the “ghost month”—will provide opportunities to add good companies to portfolios,” he said.

The ghost month is a period when many Asian investors deem it unlucky to make big moves. As it coincides with the peak of Western summer holidays, trading volumes tend to decline during the period.

“We will be getting the last batch of the earnings reports. Most of the major firms have already released results and the market held up pretty well. This shows that most of the negatives have already been priced in … Upside is capped at the 5,998 level. We need a positive catalyst for the market to gain more traction,” said Jose Vistan, head of research at AB Capital Securities.

BDO Unibank chief strategist Jonathan Ravelas said the week’s close at 5,846.02 signaled further consolidation within 5,700 to 6,000 levels in the near term. —Doris Dumlao-Abadilla INQ