PH Stocks Continue to Fall, Investors Brace for Impact

The Philippine Stock Exchange Index has already suffered a decline of 7.7% during the earlier months of 2021, making it the worst performer in the Asia Pacific region. The stock gauge is expected to fall further as Covid-19 infections continue to rise and localized lockdowns, particularly in Manila, draw longer.

Certain investors like Gerard Abad, chief investment officer at AB Capital and Investment Corp, have begun bracing for turmoil by increasing their cash holdings.

He has already doubled his cash holdings since the start of the year, forecasting the stock gauge to sink to as low as 6,000 if efforts to contain the virus fail. “There is more downside risk at this point in time,” said Abad.

Unprecedented withdrawals of foreign funds have already made Philippine stocks suffer, but more challenges lie in wait. This emphasizes the fragility of emerging markets despite the beginning of global vaccine rollouts.

Other investors like Robert Ramos, head of trust and investments groups at Rizal Commercial Banking Corp., have lesser pessimistic outlooks for local stocks.

According to Ramos, the lockdown simply has a “chilling effect”, but the index is less likely to fall past the 6,300 to 6,400 level with the approval of a law that slashes corporate taxes.

“The tax benefit will definitely help companies but consumption has to happen,” Ramos explained. “A GDP surge may not happen in the second quarter as initially expected but I am hopeful spending will pick up in the third quarter when infections go down and vaccine rollout speeds up.”

On Monday, Economic Planning Secretary Karl Chua said the two-week lockdown in NCR Plus is expected to trim 0.8 percentage points from full-year growth this year nonetheless.

As covid cases continue to surge, this year’s expansion “is going to be lower than what we expected” said Finance Secretary Carlos Dominguez on Tuesday.

The Philippines’ equities are at the weakest correlation to their regional neighbors within the Asia Pacific since 2017. As it falls behind in vaccinations, the nation is expected to delay its neighbors in economic recovery.

“The bigger fear in the market is our credit rating could be downgraded because of the murkiness of the economic rebound,” Abad said. “A prolonged lockdown puts everything at risk.”

Ramos expects this year’s upside at 6,800. Similarly, Abad also puts the stock gauge’s upside at 6,800 to 7,000 levels assuming recovery gains more traction in the second half as vaccination speeds up and covid infections are contained.

Source: Manila Bulletin