Stocks brace for gloomy week as Delta threatens to douse SONA thrill

Dark clouds remain in the horizon for stocks this week as worries over the highly contagious Delta variant may curb any excitement for President Duterte’s last State of the Nation Address (Sona) and upcoming earnings recovery data.

The main-share Philippine Stock Exchange index (PSEi) lost a total of 173.09 points or 2.6 percent last week, closing Friday at 6,520.74. The main stock barometer declined for the third straight week.

Local shares would continue to be challenged by the rising COVID-19 cases associated with the Delta variant, particularly in the National Capital Region, said Manny Cruz, chief strategist at Papa Securities.“Fears of an Indonesian-like scenario that could again overwhelm health-care facilities will drag market sentiment,” Cruz said. “This environment will overshadow the President’s Sona, which may call for a push for more priority bills to boost investments, and the second quarter 2021 corporate earnings that will indicate sustained progress coming from a slump in the same period in 2020.”Mr. Duterte is set to deliver his final Sona on Monday, July 26.

Cruz said the PSEi may be able to find a support level at 6,450, a breakdown of which could drag the index to its next support at 6,350.

Jonathan Ravelas, chief strategist at BDO Unibank said the PSEi’s third straight week of decline was driven by fears that stricter lockdown measures could further weaken economic recovery. As such, investors either continued to sell or stayed on the sidelines, he said. “The week’s close at 6,520.74 highlights the bears are in control. This signals further tests towards the 6,300 level in the near-term,” Ravelas said.If this support level is breached, 5,700 to 6,000 would be within “striking distance,” according to Ravelas.

Meanwhile, the local currency lost ground for the sixth straight week as it depreciated by 0.21 percent last week to close at 50.34 against the US dollar.The peso continued to depreciate as worries lingered over the probable economic fallout from the outbreak of new coronavirus variants as well as the rising demand for the greenback, Ravelas said.

In the near term, the peso may range between 50 and 50.50 levels against the greenback, he said.

The PSEi has so far declined by 618.97 points or 8.67 percent since the start of the year. As foreigners continued to dump local stocks, foreign ownership of local equities has fallen to record lows.

Only one out of every five shares in the local stock market is now held by foreign investors.