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Stocks to take cues from MECQ transition, BSP policy meeting

By James A. Loyola

With first quarter earnings reports out of the way, although many index stocks have asked for deadline extensions, the local stock market is seen to look at how the easing of quarantine measures will restart the economy.

Traders work beneath an electronic ticker at the trading floor of the Philippine Stock Exchange in Bonifacio Global City (BGC).(Bloomberg file photo)

Traders work beneath an electronic ticker at the trading floor of the Philippine Stock Exchange in Bonifacio Global City (BGC).(Bloomberg file photo)

Online stockbroker 2Tradeasia said first quarter results hint that a bleaker outlook is seen for the second quarter, especially with extensions made on the enhanced community quarantine.

“We believe these have already been factored into pricing, although sentiment could still gyrate in case COVID-19 case data rises during the modified-ECQ (MECQ) window,” it noted.

It added that, “So far, the market has already priced-in slower capex plans for 2020, with bulk of budgets earmarked already for next year.”

This week, while investors will continue to monitor global COVID- 19 trends, they will also look forward to the Bangko Sentral’s upcoming policy meeting.

“Any provision of monetary stimulus might be received positively, but this needs to be complemented by other fiscal initiatives,” 2Tradeasia said.

Based on first quarter results and prevailing market prices, analysts have chosen some stocks that may be worth accumulating.

COL Financial currently has a BUY rating on Philippine National Bank “even though its earnings will be hurt by the COVID-19 pandemic and the ECQ as these are expected to slow economic activity which will inevitably curtail loan demand and financial transactions.”

It also expects some deterioration in asset quality amidst the suspension of business operations in various locations.

“Nevertheless, we believe that the negatives have already been largely priced in,” said COL adding that the stock is now cheap.

Meanwhile, COL is also recommending Bloomberry Resorts Corporation although its first quarter earnings were weak because “it was already expected given the negative impact of travel restrictions and the ECQ on its operations.”

While it expects much weaker earnings going forward, COL said “we maintain our BUY rating as valuations are attractive.”

Meanwhile, both COL and Abacus Corporation looks at Megaworld favorably.

COL said its likes Megaworld “for its significant exposure in the office leasing market which is the most resilient property segment during the ECQ as they continue to book revenues from tenants, although some have asked for deferral of payments.”

Abacus also noted that Mega¬world may be among the real estate companies that will “come out of this crisis quicker” because it is among the lease dependent on malls with the highest proportion of earnings from office leasing.

Thus, it said Megaworld “may be a low risk bet over a 12-month holding period.”


Source: Manila Bulletin (https://business.mb.com.ph/2020/05/17/stocks-to-take-cues-from-mecq-transition-bsp-policy-meeting/)

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