Caution as PSEi soars back to 6,000-level on economic revival
MANILA, Philippines — Optimism over the gradual re-opening of the economy buoyed the local bourse to break the 6,000-barrier on Tuesday, but a sustained rally hinges on whether the pandemic will be put under control and movement restrictions will continue to be eased.
On the second day of the re-opening of its trading floor, the Philippine Stock Exchange’s main index closed at 6,025.17, up 95 points or 1.60% from the previous day. It was the main barometer’s strongest finish since the market closed at 6,353.26 on March 11.
All sub-indices ended in green led by holding firms that gained 2.35%, followed by property (1.68%), industrial (1.26%) and financials (1.11%), mining and oil (0.66%) and services (0.48%).
“This rally is the optimism of investors towards GCQ since this will technically restart the economy thus we can see some recovery in the earnings most especially in the listed companies,” Piper Chaucer Tan, research associate at Philstocks Financial Inc, said in a text message.
Most work restarted in Metro Manila on Monday after the government shifted restrictions to a more relaxed general community quarantine (GCQ) regime, under which more businesses were allowed to re-open after getting shuttered by lockdowns for two and a half months.
For Luis Limlingan, managing director at Regina Capital brokerage, a shift to GCQ indicates a “potential for economic rebound,” following a 0.2% drop in gross domestic product (GDP) in the first quarter when the pandemic was just starting. The government is expecting the economy to enter a recession this quarter.
“Investors also monitored Sino-American trade tensions and efforts in the US, and much of the world, to overcome [concerns over] the COVID-19 pandemic,” Limlingan said in a text message.
Tan said investors are betting for relief on some heavily battered businesses under GCQ. Typical strong performers like Jollibee Foods Corp. and Petron Corp. suffered a drop in profits in the first three months due to dismal sales as a result of consumers getting stuck at home since March 17.
The slow economic revival is attracting equity investments both here and abroad. Tan said foreigners were net buyers of Philippine stocks amounting to P1.2 billion since May 31, a day before the lockdown was eased.
“But the thing here is that if GCQ and cases of COVID-19 will be put into control. The downside risk on this is the so-called ‘second wave’, (which) could impose again a lockdown and could send negative sentiment not just for the market, but for the economy as well,” Tan said.
Limlingan agreed, citing “less cases being reported and “faster than expected return to normal business operations” as among drivers that can sustain the current PSEi rally.
For April Lee Tan, research head at COL Financial, however, PSEi’s gains on Tuesday was nothing unique to the Philippines. In Asia-Pacific, markets in Jakarta closed 2.47% up, while those in Kuala Lumpur ended trading 0.21%. In Bangkok, the index ended trading 0.9%.
“I think the rally of the mark will be very dependent on the foreign fund flows. If we see foreign funds starts to sell even if the rally of the market continues, then for me this is a sign that the market rally will not be sustained,” Philstocks' Tan explained.
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