The Philippine Stock Exchange (PSE) is entering a phase of “no interest” according to stockbroker Colfinancial.com.
In this phase, “prices of stocks do not want to go down significantly anymore, even with bad news, because everyone is already expecting the worst,” said April Tan, Colfinancial.com head of research.
“Those who want to sell stocks have already sold. Although investors who are left owning stocks are aware things could get worse before they get better, they believe valuations are too cheap to ignore, and the negatives are already priced in. As such, these investors are prepared to hold on to their stocks until the economy turns around. By then, the stocks they own would be trading at much higher prices, rewarding them for their patience,” she added.
Tan said this is evident when the PSE index (PSEi) “did not fall sharply and even increased by almost 1 percent on the first day of ECQ (enhanced community quarantine” in the NCR Plus.
“Trading volume in the PSE has also been falling, and was only around P6 billion in April. It has fallen further during the first trading days of May. These factors seem to support the argument that the Philippine market is already in a “no interest” phase,” she said.
Tan said this also suggests “now is a good time to accumulate stocks.”
“Note that almost all stocks are trading below their 10- year historical average P/Es (price to earnings ratio). The ECQ and MECQ (modified ECQ) this year are also less strict compared to last year. Moreover, listed companies that we talked to already know how to cope with stricter quarantine measures. Finally, the number of daily new cases is already going down, warranting the loosening of quarantine restrictions soon. Because of cheap valuations and confidence of surviving the crisis, several listed companies and their insiders are buying back shares in their own companies,” she added.
Lester Azurin, analyst at AB Capital Securities Inc., said investors can even expect a better stock market performance for the year only because of the low base effect compared to last year.
On the possibility of the PSEi closing at 7,600, Azurin said the economy has seen the worst and recovery is expected in the second quarter all the way to the second half despite a 4.2-percent contraction in the first quarter.
Azurin also cited government’s effort to vaccinate a significant portion of the public, which is crucial for the recovery of the economy while the coronavirus disease 2019 (COVID-19) rate continues to be reduced.
“We’re seeing some encouraging signs the second wave has started to abate, started to ease,” he said.
Azurin said the stock market is expected to benefit from the spending in the election season.
He noted that 12 months into the elections in 2004, 2010, and 2016, the PSE increased at an average of 24 to 25 percent.
Azurin expects companies to post a combined earnings per share growth of 61 percent this year, “mainly because of base effect from the low base 2020.”
