Developments concerning the coronavirus disease 2019 (COVID-19) pandemic and how the initial days of the community quarantine of Manila will play out at this week’s trading at n the Philippine Stock Exchange (PSE) resumes Monday.
This as the number of confirmed cases of COVID-19 in the Philippines continues to rise.
Japhet Louis Tantiangco, analyst at Philstocks Financial Inc., said the Metro Manila quarantine is particularly important to investors as the Philippine capital contributes “an average of 36.4 percent to Philippine GDP (gross domestic product) from 2014 to 2018.”
“The quarantine will cost our economy from the… travel restrictions that will weaken our transportation industry, to the limited mall hours and agreed upon mall closures, and even the curfews that would lessen the economic activities,” he said.
“Investors could discount this in next week’s trading,” he added.
Tantiangco said investors may also watch out for the Bangko Sentral ng Pilipinas’ meeting on March 19.
“Overall however, with the uncertainties brought by the coronavirus, bias remains tilted to the downside with the possibility of breaching the 5,700 support level again,” he said.
Last week’s trading has been the most trying week for the stock market against the backdrop of the COVID-19 pandemic.
The PSE’s circuit break was tripped twice last week, Thursday and Friday, as the market grappled with the increase in cases and incidence of death.
The circuit breaker is a mechanism installed by the PSE in 2008 to stem the tide of selling when the index drops by 10 percent. It aims to give investors time to digest the impact of the unusual drop and help restore normalcy in the stock market.
Abacus Securities Corp. in an investor’s note said the PSE lost P1.6 trillion in market capitalization last week alone due to risk aversion.
“Ignorance was bliss, until it wasn’t. People and the government had become complacent from mid-February to early March as evidenced by the drop off in Google searches (chart below) for ‘surgical face masks.’ Then, in a span of seven days, we went from three cases with one fatality to 52 cases with 5 deaths and a lockdown (albeit a relatively loose one),” it said.
Abacus said while the “lockdown” is not “as draconian as compared to other countries,” social distancing will be the norm and will invariably hurt many sectors of the economy, which may drag the first quarter GDP’s growth worse than the 5.6 percent recorded last year.
“Transport sector, airlines and allied industries will bear the brunt of today’s fall due to the travel restrictions. We reiterate, however, that this disruption will be temporary. Writing off 2020 doesn’t mean that these stocks deserve their steep losses of between 30 percent and 65 percent year-to-date,” it said.
Eleven weeks into 2020, most investors seem ready to write off the year for the stock market, but valuation wise, the market “already looks cheap,” Abacus noted.
