Stocks to trade on cautious note as virus run-up weighs

The local market is likely to usher in the first trading week of 2021 on a cautious note, with investors looking for fresh catalysts to support stocks.

Analysts said while the overall economic outlook for this year remains positive, concerns about a possible spike in COVID-19 cases in the country following the holiday season continue to weigh on the market.

“Our investment thesis for 2021 rests heavily ion how the pandemic will continue to shape lives—both in the medical and economic sense. While the downside risks are not to be discounted, there are tailwinds that may push the index towards the 8,000 level,” online brokerage firm 2TradeAsia.com said.

The positive scenario will depend on several factors, including the rapid deployment of vaccines across the country.

“Fingers are crossed for 2021 to be a year for repair and recuperation at a time where the lockdown economy is being threatened anew by a mutated strain of coronavirus. Expect corrections in equity prices alongside caseload spikes,” the online brokerage firm added.

Philippine Stock Exchange president and chief executive Ramon Monzon expects the market to perform better this year

“The government’s announced plan to start local mass inoculation to fight COVID-19 starting the second half of 2021 would enable the lifting of all restrictions, prompt a strong rebound in corporate earnings and thus allow the economy to take off,” Monzon said.

Monzon, however, conceded that restoring the confidence of investors would continue to be a challenge.

The PSEi last week closed at 7,139.71, down down 8.6 percent year-on-year. The index managed  climbed 54.4 percent from its lowest closing level of 4,623.42 on March 19.

The All Shares index also finished lower year-on-year, down 8.1 percent. Among the sector indices, only mining and oil closed in the green, up by 17.8 percent. The financials sector dropped the most after shedding 22.3 percent year-on-year.

The daily average value turnover slightly improved to P7.35 billion from the P7.29 billion in 2019.  Foreign funds were net sellers in 2020 by P128.65 billion from P14.26 billion a year ago.

Wall Street indices, meanwhile, finished 2020 at all-time highs on Thursday, a surprising conclusion to a year in which the United States endured a recession caused by the deadly COVID-19 pandemic that continues to plague the country.

The Dow and S&P 500 finished at fresh records, capping a year in which they, along with the Nasdaq, scored significant gains even amid elevated joblessness, rising hunger and acute pain in sectors such as hospitality, airlines, oil and gas and the performing arts.

“For Main Street, it was a terrible year,” said Briefing.com analyst Patrick O’Hare. “For Wall Street, it was a fantastic year.”

The broad-based S&P 500, which swooned below the 2,200-point level at its nadir in March, finished the year at 3,756.07, up 16.3 percent for the year.

European equity markets had a mixed year, with Frankfurt higher, but Paris declined and London suffered its worst year since the global financial crisis.

The gains in US indices seemed impossible in March, when exchanges were forced to suspend trading as stocks went into free-fall as much of the US economy was shut down to combat the coronavirus. With AFP