Expect bears taking over this week on reignited virus fears
The resurgence of local COVID-19 cases, which hit a daily record high of 17,231 on Friday, is seen to temper risk-taking at the stock market this week.
The main-share Philippine Stock Exchange index (PSEi) gained 313.03 points or 4.9 percent last week, closing Friday at 6,633.22 as investors digested the latest PSEi rebalancing and the easing of quarantine restrictions in Metro Manila. By Friday, however, sentiment turned gloomy as investors’ attention shifted back to the daily COVID-19 log and the highly contagious Delta variant.
As such, Eagle Equities president Joseph Roxas expects the main index to trade with a bearish bias this week.
Any upside would likely be limited to the 6,700 level as COVID-19 cases hit “breakout” levels, Roxas said.
The index may consolidate and find support at the 6,500 level, while the next barrier is seen at 6,300, according to Roxas.
BDO Unibank chief strategist Jonathan Ravelas said last week’s close would signal further consolidation of the main index within the 6,300 to 6,700 borders in the near-term.
Last week, credit watchdog Fitch Ratings said a resurgence in COVID-19 cases in July and August across several Asia-Pacific (APAC) markets could affect a number of corporations in the region this second half, weakening prospects of a reversal of pandemic-related negative rating actions.
Fitch implemented negative rating actions on a total of 78 entities, equivalent to 23 percent of its current portfolio of 344 publicly rated APAC corporates, since the beginning of March 2020.
In a separate commentary, Fitch said the issuer default ratings of Philippine banks were sensitive to movements in the sovereign rating, currently at “BBB” with a negative outlook.
“We expect the COVID-19 pandemic will continue to challenge banks’ business prospects, loan quality and profitability over the next 12 months,” it added.
