July 5, 2020
2Q20 Recap 2H20 Philippine Stock Market Outlook
After the great drop of March 2020 to 4,039.15 which erased nine years of the PSEi, the index recovered and even reached a year-to-date (YTD) high of 6,517.49. At that point, that mark was considered as a crucial border that the PSEi does not deserve to cross yet. And as expected, profit-taking ensued, and the PSEi retreated to 6,207.72 to end 1H20.
The recovery was fueled by optimism from the change of an Enhanced Community Quarantine (ECQ) to a less strict General Community Quarantine (GCQ) in the period. This allowed some businesses to open again but mostly to a limited capacity. As this occurred, cases of COVID-19 in the Philippines accelerated past the 30,000 mark.
The following is the performance of the recommended stocks portfolio for 2020 from its inception on December 6, 2019. It is composed of four stocks of equal weighting.
They underwent a stringent screening process and were found to have value from a group of 74 bank and non-bank stocks.
The stocks portfolio is now down by 20.6% in end-June 2020. Its loss is also near the losses of the PSEi of 20.6% and the ASI of 21.5%.
Even during the pandemic, there have been two successful IPOs and healthy volume as the Philippine Stock Exchange (PSE) operated in a half-day schedule. The BSP also responded with a rate cut to help bring down bank lending rates to help businesses and the economy.
The PSEi is buoyed by funds with at least a two-year investment window. They are banking on developments from the production of a vaccine against COVID-19. The general timeline is still until 1Q21 to 4Q21 to produce one, and that is six months to one and a half years from now.
Many companies are coping and are in survival mode right now. Earnings have shrunk. All are doing their best to adapt and operate safely under a COVID-19 environment. The shortest buffer based on retained earnings seen so far are stocks with two to three years before going into deficit.
Our reco is to confine accumulation in COVID-19 positive stocks, maintain the appropriate stocks to cash ratio and be mindful of the PSEi support and resistance levels applicable in this pandemic. Defense and awareness of buying windows are still key going towards 3Q20.
This report is solely for information. It should not be constituted as an offer for solicitation for the purchase or sale of securities mentioned. The information herein has been obtained from sources believed to be reliable. Whilst every effort has been made to ensure accuracy, we do not guarantee the accuracy or completeness of the report. All opinions and estimates expressed herein constitute our judgment as of this date made on a reasonable basis and are subject to change without notice. No liability can be expected for any loss arising from the use of this report or its contents. As this is general information, it does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may obtain this report. Pictures in this report cannot be copied or redistributed and are owned by Corpecon Research.