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Stocks seen dropping on budget delay concerns

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COURTESY OF PHILIPPINE STOCK EXCHANGE, INC.

By Denise A. Valdez, Senior Reporter

LOCAL SHARES are expected to continue slipping this week as worries over the possibility of a delayed 2021 budget and concerns over the coronavirus pandemic hound investor sentiment.

The benchmark Philippine Stock Exchange index (PSEi) closed Friday’s session at 5,931.61, down 11.05 points or 0.18% from the last session.

On a weekly basis, the PSEi lost 67.79 points or 1.13% as it recorded four days of decline out of last week’s five trading days.

Value turnover jumped 76% to an average of P9.37 billion, while net foreign selling continued and grew 37% to an average of P1.03 billion.

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“Lacking catalysts, investors remained passive for most of the week as escalating tensions in the Congress threatened a repeat of 2019’s delayed budget,” online brokerage 2TradeAsia.com said in a note.

A speakership row at the House of Representatives has threatened the postponement of the deliberations for the P4.5-trillion national budget for 2021. Before President Rodrigo R. Duterte stepped in, sessions were supposed to continue in mid-November, as opposed to the original schedule of approving the budget by mid-October.

“Similar to 2019, a derailed budget will mean a reenacted one will be put in its place, which is lower and have different sector appropriations; a repeat for 2021 will be a negative — magnified even, as specific recovery points have to be addressed in response to COVID-19,” 2TradeAsia.com said.

The 2021 budget will remain center stage among factors that will drive investor sentiment this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said.

“[C]onfidence towards the local market could remain frail as investors continue to worry over economic headwinds. Concerns over the risks stemming from the coronavirus pandemic, and the possibility of a delayed passage of the national budget for 2021, may continue to dampen sentiment… With this, the local market may decline further,” he said in a text message.

As investors await developments on the budget, 2TradeAsia.com said the focus will be on the fourth quarter performance of the economy, as this will indicate how 2021 may pan out. “Black swan events in 2020 have encouraged market players to train attention to 2021 instead, of which the fourth quarter will play a crucial part, particularly for position-investing.”

Unlike previous years, the brokerage said fourth quarter performance may remain slow this year, as the holiday-induced spending will likely be dampened by, possibly,  lower 13th month wages and deferred company bonuses.

“The incoming yuletide season is thus expected to remain underwhelming year-on-year, but a touch improved quarter-on-quarter,” 2TradeAsia.com said.

The brokerage is putting immediate support at 5,700 and resistance within 6,000-6,150. Philstocks’ Mr. Tantiangco sees minor support within 5,830-5,700 and resistance at 6,100.

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