COL Financial: Don’t abandon PH stock market just yet

The government’s poor response to the COVID-19 crisis weighed on the stock market as of end-July, culminating in the shock announcement of another hard lockdown in Metro Manila that spooked investors and triggered another selloff, COL Financial Group chief equity strategist April Lee Tan said on Monday.

But during the stock brokerage firm’s mid-year briefing, Tan said there were still reasons for measured optimism and opportunities to make money even if “it is easier to be bearish on the Philippines than bullish.”

Tan said the government’s COVID-19 vaccination efforts were now ramping up while corporate earnings came in stronger than expected.

She added the threat of inflation was easing and, with the latest enhanced community quarantine rules for Metro Manila beginning Aug. 6, the negative news was already being “priced in” by the market.

Tan said the looming spread of the more infectious Delta variant remained, adding it was essential for the government to curb new cases and safely reopen the economy.

Avoiding a downgrade

“If the government can finally allow the economy to open on a sustainable basis, then we will avoid a credit rating downgrade,” she said during an online briefing on Monday.

COL had lowered its year-end target for the Philippine Stock Exchange index (PSEi) from 8,300 to 8,100, which represents a 25-percent upside over the PSEi’s 6,446.31 close on Monday.

The big drop for most of the year also meant investors could still scoop up index names and large companies at a discount to their historical valuations.

For the second half of 2021, Tan favored PLDT Inc., Globe Telecom, Puregold Price Club Inc., Filinvest REIT Corp., BDO Unibank, Metropolitan Bank & Trust, GT Capital Holdings, D&L Industries Inc., Megaworld Corp., Metro Pacific Investments Corp., Monde Nissin Corp. and Aboitiz Power Corp.

Noticeably absent were other stocks associated with a boom in consumer spending during the elections despite the upcoming presidential polls in 2022.

Tan said the view for companies that typically do well during an election cycle was less bullish next year.

Election season

She explained there were less political advertisements during this period versus the last elections and even restaurants were tempering expectations.

“They don’t see as big a boost anymore,” Tan said, referring to Jollibee Foods Corp., which operates the country’s largest fast-food group. “Candidates are now ‘wise’ when they order food. They don’t order Jollibee anymore.”

Juan Barredo, COL’s chief technical analyst, said the recent selloff dragged the PSEi lower than was expected.

The PSEi had a relief bounce on Monday, but he noted eyes were on the support levels. The ideal scenario was for the benchmark measure to hold the 6,150 level to create a “higher low” and prevent further downside, Barredo said. INQ