Bull or bear market? Understanding the stock market post-COVID

BusinessWorld holds first Virtual Stock Market Roundtable

By Bjorn Biel M. Beltran, Special Features Writer

Since March last year, the Philippine stock market has been through quite a ride. After crashing to an eight-year low of 4623.42 due to a COVID-19-fueled investor sell-off, the Philippine Stock Exchange index has since climbed steadily, of late hovering around the 7,000-level mark a year after the crash.

At a glance, it seems bizarrely out of place. Many of the country’s economic prospects remain shrouded in uncertainty as COVID-19 continues to hold the world in a state of constant apprehension.

In the Philippines, especially, as it had just ended 2020 with the worst economic performance the country has seen since it began releasing growth data just after World War II in 1947. The country’s gross domestic product shrank 9.5% last year — the first annual contraction since the Asian financial crisis.

To understand the goings-on in the stock market, BusinessWorld, the country’s leading business daily, held its Virtual Stock Market Roundtable last Feb. 17, gathering financial experts to discuss the stock market’s 2020 performance and its prospects this year.

“This year is really the start of the country’s recovery story,” Michael Gerard Enriquez, chief investments officer of Sun Life Philippines, began.

“I think we’ve seen last year how the market has rebounded from its lows of about 4,600 and we ended the year up to 7,000. You see how the psyche of the market has moved and usually, it’s sentiment that drives markets faster than the actual recovery of the economy,” he said.

Mr. Enriquez pointed out that amid historic low interest rates and the slow resurgence of economic activity among consumers, the prospects of a rebound is likely, especially for the equity markets as consumption drives earnings.

April Lynn Lee-Tan, VP, head of research and chief equity strategist at COL Financial, echoed the sentiment. “It’s easier to be negative than to be positive nowadays. There are so many reasons to be negative, including the disappointing economic recovery of the Philippines relative to other Asian countries,” she said.

“But that said, am I bullish or bearish? When I weigh the positives and negatives, I have no choice but to be bullish,” she added.

Ms. Tan emphasized that despite the high unemployment rates, poor business confidence, and a conservative fiscal response from the government hampering growth, many factors remain in favor of the country’s recovery. For the equity market especially, the rollout of the vaccine and the boost in consumer confidence that comes with it will serve as a blessing.

“Last year, we didn’t know how this is going to end. But now, there’s a little bit more visibility,” she said.

Moreover, since the pandemic forced the country on lockdown last year, many new retail investors have come into the market and they have yet to see a reason to be bearish since.

JC Bisnar, CEO and co-founder of Investagrams, said that many retail investors made money buying stock during the market crash last year. And it could be a reason to remain hopeful for the growth of the market in the future.

“A lot of people had to resort to other means to make money during the pandemic, whether that be online businesses, freelancing, e-commerce, and the stock market,” he said.

“That’s one reason why a lot of new investors came into the market: because people were just looking for a way to make money outside of their regular jobs. I believe that realization will be the catalyst in spurring the growth of retail investors. Moving forward, I think people will realize that they cannot just rely on the stability of their jobs. They need something else for their financial wellness,” he added.

Despite all this, some caution may be warranted. “The performance of the stock market in some ways is not reflective of the general economy. The people who are buying stocks in the Philippines is less than 1% of the population, maybe 2% given the increase in the number of investors,” Ms. Tan said.

“From March to today, the market is up by a lot, from 4600. We have a lot of people making money and that’s why they are a lot more excited to keep on buying stocks. And that’s one of the reasons why retail investors are continuing to invest in this market, and we’ve been able to go up even in the absence of foreign investors,” she added.

“The key now is what to expect moving forward. Recovery will definitely come but it won’t be in one snap,” Mr. Bisnar added.

BusinessWorld Virtual Stock Market Roundtable is presented by BusinessWorld Publishing Corp.; with the support of Management Association of the Philippines, CFA Society-Philippines, Investagrams, and The Philippine STAR.