Share prices are expected to move sideways this week on declining investor appetite due to the continued surge in coronavirus cases.
Online brokerage firm 2TradeAsia.com said a further decline in corporate earnings in the second quarter of the year was also weighing on the market.
Corporate earnings dropped by an average of 24 percent in the first quarter of the year.
“As this this number reflects 15 community quarantine days, we anticipate second quarter to scale new lows, likely a contraction of at least 30 percent on average, if not post negative results altogether,” the online brokerage company said.
“And while our full year 2020 contraction forecast of -31 percent year-on-year decline in earnings for the PSEi implies slight improvement in second half earnings, reality in the medium term is that investors will have to confront with ugly earnings season until profit drivers improve, which in turn rests on the ‘holy grail’ coronavirus vaccine,” it added.
The brokerage firm, however, noted an ample liquidity in the market as seen by the strong demand on recent corporate bonds issuances by several companies, including PLDT Inc., BDO Unibank Inc. and Metropolitan Bank & Trust Co.
“Bottom line is, excess funds seeking yield, and as such, need only the impetus that corporate profits have stabilized before flowing back into equities, which historically provide superior capital returns on top of dividend yields,” 2TradeAsia.com said.
The Philippine Stock Exchange Index last week fell 2.8 percent to close at 6,197.38 as investors took profits on renewed concerns over the pandemic’s growing impact to the economy.
Foreign investors were net sellers for the week by P5.6 billion, while the average daily value traded stood at P6.5 billion from the previous week’s average of P8.5 billion.
Weekly top price gainers were led by GMA Network Inc., which rose 20.8 percent to P6.03.
Weekly top price losers included Ayala Land Inc., which dropped 9.1 percent to P32; Robinsons Land Corp., which shed 7.4 percent to P15.92; and Jollibee Foods Corp., which fell 6.8 percent to P137.50.
US and European stocks, meanwhile, advanced Friday on optimism over the chances of an EU economic stimulus plan and fresh hopes for coronavirus treatments.
Traders nonetheless continued to track rising virus infection rates and braced for next week’s corporate earnings reports.
In New York, the tech-rich Nasdaq Composite Index rocketed to another record, while the Dow and S&P 500 also gained.
The London stock exchange was 0.8 percent higher at the close, while Frankfurt added 1.2 percent and Paris was up by 1.0 percent.
Investors cheered remarks from the head of German biotech firm BioNTech to the Wall Street Journal that a vaccine candidate would be ready for regulatory review by the end of the year.
Analysts also pointed to a positive announcement from Gilead Sciences about clinical trials on remdesivir, the first drug shown to be relatively effective in treating COVID-19.
On Wall Street, airlines and hotel stocks rallied Friday, along with petroleum producers—sectors hard-hit by social distancing protocols.
The prospect of a vaccine in the foreseeable future “is the kind of announcement that gives the market a bit of comfort that there is light at the end of this,” said Quincy Krosby, chief market strategist at Prudential Financial. With AFP