By Keren Concepcion G. Valmonte

PHILIPPINE COMPANIES are watching the government’s vaccination drive against the coronavirus to guide their investment decisions for the rest of the year, analysts said.

“Foremost on their minds is how infection could be contained to manageable levels,”  Aniceto K. Pangan, a trader at Diversified Securities, Inc. said in a mobile phone message last week.

Virus mutations, vaccine supply shortage and rollout delays, as well as public hesitancy to get vaccinated are all areas of concern.   

“Companies are tracking the arrival and deployment of vaccines, which would help reduce new COVID-19 cases and facilitate the further reopening of businesses,” Frances Nicole L. Samorano, a research analyst at RCBC Securities, Inc. said in an e-mail.

Earnings projections and investment decisions hinge almost entirely on how quickly the government’s inoculation drive progresses.

Fresh lockdowns brought about by a surge in coronavirus variant infections seem to make economic data releases and corporate profit announcements hopelessly obsolete for anyone who uses them to guide investment decisions.

Pandemic restrictions are holding companies back, but some analysts see a silver lining.

“Most companies had better earnings in the first quarter than in the fourth quarter of last year, which tells us that the recovery’s pace is picking up,” AAA Southeast Equities, Inc. Research Head Christopher John Mangun said in an e-mailed reply to questions.

“However, the tighter restrictions in the second quarter killed the momentum and it’s going to show in the next earnings release,” he added.

President Rodrigo R. Duterte had put back Metro Manila and nearby provinces under a strict lockdown at the end of March until mid-May amid a fresh surge in infections that led to a near breakdown of the country’s health system.

Listed companies on the Philippine Stock Exchange posted mixed but generally positive first-quarter earnings, which analysts said were within expectations “with some surprises.”

“Results were mixed year on year and were mostly in line and above estimates,” Cristina S. Ulang, research head at First Metro Investment Corp., said in an e-mail.

Consumer companies fared better year on year. Telecommunication operators also benefited from increased demand for internet data during the lockdown.

Company earnings were boosted by the global economic recovery and the enactment of a local measure that would lower corporate income taxes gradually to 25% for big companies and to 20% for small businesses, she said.

Mr. Pangan said companies producing nonessential products were still reeling from the effects of the pandemic and inflation as shown by a 4.2% contraction in economic output in the first quarter, which was worse than expected.

This extended Philippine recession to five straight quarters as the coronavirus pandemic dragged on.

An unexpected gainer during the period was the mining sector.

“It is a nonessential that’s showing a lot of surprises,” Mr. Pangan said. “Earnings are above estimates for those operations such as nickel, copper and gold mining companies,” he added.

Mr. Mangun traced the sector’s earnings boost  to all-time high metal prices.

“Despite weak economic conditions, many companies have adapted by adjusting their cost structures to stabilize their businesses,” Ms. Samorano said.

“For banks, we are still wary of weak loan growth and possible asset deterioration due to the prolonged pandemic, in spite of aggressive loan loss provisions booked last year.” She also said earnings of property companies were still below expectations.

Luis Gerardo A. Limlingan, sales head at Regina Capital Development Corp., said the sector’s residential segment seemed to be doing better than most expected.

“Tourism, gaming and the airlines are the biggest concern,” Mr. Mangun said. “Employees in these industries have been laid off and it may be a while before they can find a job in this sector.”

Ms. Ulang sees bright spots for companies in infrastructure, logistics and health. Some companies are looking into digital transformation opportunities amid changes in consumer behavior during the pandemic.

“Export-driven business segments will benefit from the global recovery,” she said. She added that real estate investment trusts would benefit from the global recovery, as office space demand from business process outsourcing companies increases.

“Most companies have put expansion plans on the backburner and may revisit these in two to three years,” Mr. Mangun said.

He added that expectations of slower growth in the next year or two would influence capital spending by companies.

“Capital expenditure programs would also be a function of economic reopening and the return of consumer and business confidence,” RCBC Securities’ Ms. Samorano said.

Concerns about infection rates and the spread of coronavirus variants continue to cloud market sentiment.

“There will most probably be a decrease in capex budget if the infection rates continue to be unmanageable,” Mr. Pangan said.

“It’s going to come down to how fast the inoculation takes place so that the economy can open up further,” Mr. Mangun said.