While the PSEi retreated right after breaching the 7,300 level, the market is seen to try to push it back again if it gets encouraging news from initial corporate earnings results as well as from the new COVID cases reports.
“While the local market had a good run this past trading week, it was still unable to hold its position at the 7,300 level which is serving as its immediate resistance. Next week, the market may continue to test the said level,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He noted that, “The downtrend in our country’s daily new COVID-19 cases, if sustained, is still seen to give a boost to sentiment since it raises the possibility of further easing of restrictions in the country in the near term.”
However, Tantiangco said “Inflation worries are seen to pose downside risk to the market amid the elevated global oil prices.”
“Investors are also expected to watch out for the upcoming third quarter corporate earnings reports to see if there will be positive outliers amid the tough economic conditions during the said quarter caused by the resurgence of COVID-19 cases and the reimposition of strict quarantine measures in the country,” he said.
Online brokerage firm 2TradeAsia.com said it expects to see moderate organic earnings per share expansion outside of base effects from last year (51 percent in third quarter of 2021) characterized by strong year-on-year but weaker quarter-on-quarter figures.
“More visibility will be provided in the coming week as BDO Unibank, Meralco, and Wilcon, leaders in their respective sectors, make their announcements (representing 10 percent of the PSEi basket),” it added.
With election spending shifting to full gear and key industries meaningfully getting some traction (i.e. tourism & leisure, after being deadweight), the brokerage said, the market is incentivized to frontload holdings ahead of 2022, which may explain some premium valuations in the medium-term.
Since broad-based rallies mean that some equities will advance more than others, and not all the time are these based on fundamental merits any more than they rely on investor bias, 2TradeAsia.com advises invetsors to “opt for these laggards—both for alpha returns and lower risk of downside in case of technical corrections in the very short-term.”
BDO Chief Market Strategist Jonathan Ravelas said investors remain optimistic on prospects of further economic reopening as COVID-19 infections decline further.
However, he said inflation worries fanned by elevated oil prices caused the index to surrender some gains allowing it to close off the week’s high.
“Last week’s close at 7,289.61 highlights the market still has some gas to retry the 7,300 to 7,400 levels in the near-term. But should the profit-taking activities continue and break below the 7,090 levels, a near-term top may have been achieved,” Ravelas said.
Meanwhile, Abacus Securities Corporation is recommending a BUY for Petron Corporation as it is “in a unique position to benefit from both the economy’s gradual reopening and China’s energy shortage.”
It noted that, the strong demand from China is pushing margins for diesel in the region higher. Petron is thus seeing an improvement in gross revenue margins that are now near pre-pandemic levels.
For its part, COL Financial is recommending a BUY for Robinsons Land Corporation after rerating the firm’s value with the listing of its real estate investment trust as well as the potential recovery in its malls business.
“We are also factoring in the value realization exercise made by RLC when it listed its RL Commercial REIT. RLC not only raised P23.53 billion from the IPO but also unlocked the value of a significant portion of its office leasing portfolio,” COL said..
Using the market valuation of RCR and our own valuation of the remaining office assets under RLC, we raised our valuation of RLC’s office assets to P69.1 billion from P50.97 billion previously.
Adding the P23.5 billion of proceeds from the IPO, the total impact of the RCR listing to RLC’s valuation is an additional P41.6 billion or P8.00 per share to its total net asset value.
“We believe RLC has the potential to outperform the index given that its shares are currently very undervalued based on our estimates. Moreover, being one of the most hurt by the pandemic, RLC will also be a major beneficiary of the recovery. The national elections next year could also give consumer spending a boost which would be positive for mall operators such as RLC,” said COL.
Source: Manila Bulletin (https://mb.com.ph/2021/10/24/stock-market-to-take-cues-from-earnings-covid-reports/?utm_source=rss&utm_medium=rss&utm_campaign=stock-market-to-take-cues-from-earnings-covid-reports)
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