Stocks to drop as market awaits gov’t plan on virus
By Denise A. Valdez, Senior Reporter
LOCAL SHARES are expected to move sideways this week with a downward bias as investors continue to look for indicators that would determine the fate of businesses after the lockdown.
The benchmark Philippine Stock Exchange index (PSEi) dropped 56.56 points or 0.95% to close at 5,846.02 on Friday.
On a weekly basis, the PSEi was down 82.43 points or 1.39% to extend its losses for the fifth consecutive week.
Value turnover increased 66% to an average of P7.03 billion, but net foreign selling grew more than three times to an average of P1.79 billion.
“Sessions were generally volatile during the week, as markets reacted to the second quarter economic contraction and July inflation,” online brokerage 2TradeAsia.com said in a market note.
The government reported last week that the economy shrank 16.5% in the second quarter, marking its deepest decline on record and officially plunging the Philippines into recession.
The decline was worse than most had anticipated and concerns continue to mount as Metro Manila and key areas have been put back on tighter quarantine measures for two weeks until Aug. 18.
“Moves to raise hospital capacity and isolation zones would help appease concerns on the local economy’s ability to handle (the pandemic),” 2TradeAsia.com said.
It noted the reimposition of a stricter lockdown is a response to the growing coronavirus cases, which can only be subdued by “strategic plans on health infrastructure support…while waiting for vaccines.”
The Philippines now leads Southeast Asia on the highest number of coronavirus infections at 126,885 as of Saturday. The bulk of new cases come from Metro Manila, or 2,669 out of the 4,226 new cases.
Aside from coronavirus numbers and macroeconomic data, companies have also been releasing their second-quarter earnings reports in the past weeks. But 2TradeAsia.com said investors are rather looking at capital expenditure (capex) plans.
“Preliminary indications on sequel months’ capex initiative remain hazy for most, and remains attuned with the lifting of quarantine measures. What is certain, however, is that resumption of aggressive capex plans are seen in 2021-2022,” it said.
All these elements, along with global events such as the ongoing tension between the United States and China, may continue weighing on investor sentiment this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said.
“[W]e are currently in a recession and getting out of this is something we don’t see in the near future… The market’s trading range for (the coming) week is seen to be from 5,700 to 6,100,” he said in a text message.
2TradeAsia.com is putting the market’s range within 5,500 to 6,000 this week.
