Virus worries, IPOs to affect market sentiment

INVESTORS are expected to stay on the sidelines this month on concerns over the impact of the new coronavirus disease 2019 (COVID-19) variant on economic activity.

The 30-member Philippine Stocks Exchange index (PSEi) plunged 77.56 points or 1.06% to finish at 7,200.88 on Monday, while the all shares index slid 33.26 points or 0.85% to close at 3,838.13.

Philippine financial markets were closed on Tuesday in observance of Bonifacio Day.

“It will be hard now because it won’t be the same Christmas rally [the] markets were hoping for because of the risk of new COVID-19 variant,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Omicron, the new COVID-19 variant that was first detected in South Africa, has now spread to more countries, namely: Hong Kong, Britain, Germany, Italy, Belgium, Botswana, Israel, Hong Kong, Netherlands, Denmark, Australia, and Canada.

The World Health Organization said on Monday that the Omicron variant carried a very high risk of infection surges, while border closures by various countries cast a shadow over an economic recovery from the two-year pandemic, Reuters reported.

Asian share markets weakened sharply in late trading on Tuesday, giving up earlier gains as investors worried the Omicron variant will prove more resistant to vaccines and could cause more widespread global economic disruption.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.45% lower later on Tuesday after initially being up as much as 0.52%.

“We’ll have to see how December unfolds amid the ongoing spread of the Omicron variant, coupled with inflation fears across the globe. Investors may be looking forward to the upcoming listing dates of a few IPOs (initial public offerings) in the local bourse,” Timson Securities, Inc. Trader Darren Blaine T. Pangan said in a Viber message.

Medilines Distributors, Inc. and Solar Philippines Nueva Ecija Corp. are set to conduct their IPOs this month, while Citicore Energy REIT Corp. and Figaro Coffee Group, Inc. are just awaiting the exchange’s approval for their offerings.

“Immediate support is at 7,200 versus further downside potential or correction, while next important support level is at 7,040-7,120 levels, which help keep intact the underlying upward trend over the past two months,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Mr. Ricafort added that in case there is a “healthy correction” for the PSEi, a support at the 6,730-6,870 levels will help maintain the upward trend over the past four months.

Meanwhile. Timson Securities’ Mr. Pangan said 7,060 is the PSEi’s significant support level this month.

“Otherwise, he said, we’ll have to see if the index breaks out of the 7,400 level before the year ends,” he said. — M.C. Lucenio with Reuters