CORONAVIRUS DISEASE 2019 (COVID-19) fears are expected to spur more volatility in the already bearish stock market, as Metro Manila starts the first work week under “community quarantine.”

Last week’s bloodbath saw the Philippine Stock Exchange index (PSEi) plunge over 10% during intraday trading on Thursday and Friday, triggering the circuit breaker for the first time since October 2008. The PSEi recovered slightly on Friday, closing up 1% to 5,793.94.

For Philstocks Financial, Inc. Research Associate Claire T. Alviar, Friday’s rebound may not be indicative of a market’s recovery as worries over the COVID-19’s economic impact persist.

Metro Manila on Sunday began a month-long lockdown that also banned mass gatherings, as well as land, domestic air and sea travels to and from the region.

“Although goods and services will continue to flow and no disruption of supply is expected by the government, the demand for unnecessary goods and services might drop since the public is avoiding crowded places,” she said in a text message.

“Negative sentiment will further rise in the market due to the expected lower demand from the public which will eventually hurt businesses’ earnings,” she added.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said investors are reacting to each development on a day-to-day basis.

“All sectors are vulnerable. At a situation like this, it is hard to guess where people will be allocating their resources,” he said in a mobile message over the weekend.

Amid panic selling in the stock market, Ms. Alviar said the most vulnerable are airlines — PAL Holdings, Inc. and Cebu Air, Inc.

The direct impact of cancelled flights, travel bans and lower tourist arrivals to the airlines’ earnings is unavoidable, she said.

“(What) they can only do is reduce costs by layoffs or cut pay, while the lower oil prices will also help to mitigate some losses,” Ms. Alviar added.

PAL Holdings has already announced layoffs affecting around 300 workers, while senior management officials of Cebu Pacific have decided to take a pay cut as the virus outbreak hurts operations.

PNB Securities, Inc. President Manuel Antonio G. Lisbona said oil and energy stocks may also fall amid slowing demand.

He said the month-long community quarantine in Metro Manila will hurt mall operators and restaurant chains, as people avoid going out and forced to stay at home.

Mr. Lisbona said property firms are also vulnerable due to the slowing demand from the Chinese market.

Ms. Alviar also noted companies in the tourism sector, as well as casinos and gaming, may see slower earnings, amid a drop in both domestic and foreign tourists.

Companies with export demands involving China are also seen to take a hit, Ms. Alviar said.

“Since many were likely caught unable to sell given the suddenness of the drop, I would advise to take advantage of any rallies to lighten up their portfolios and raise liquidity and buy back at some later date,” Mr. Lisbona said in a mobile message.

While the market may remain volatile, he said Philippine stocks may see a spillover from the gains in the US market last Friday. “On the whole, smaller markets will move in alignment with the major markets particularly the US,” he said.

For Philstocks’ Ms. Alviar, it is best to sell on rally and secure gains for now. “We think that (investors should) start to accumulate shares only when the virus cases subside,” she said.

She noted investors may snap up stocks of food manufacturers and grocery retailers for now as these offer essential goods and may “benefit” from the public’s panic buying.

For Diversified Securities, Inc. Equity Trader Aniceto K. Pangan, investors should also look for companies with low valuation and buy only on market weakness.

“Investors should also avoid listed companies with high debt exposure that are above industry level as this will be hit hard by this situation,” he said in a text message. — Denise A. Valdez

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