Philippine Stock Market Research

April 16, 2021

1Q21 Recap 2Q21 Philippine Stock Market Outlook

Following the market’s euphoria over the reopening of the economy from the COVID-19 pandemic, the PSEi reached a high of 7,432.40 on January 11, 2021 before creating a downtrend to the 6,400 to 6,600 level throughout 1Q21.

During this period, several businesses such as resorts, gyms and driving schools were allowed to run for the sake of economic growth.  We considered this move as reckless; and it was as COVID-19 cases surged to almost 13,000 per day filling up hospitals’ capacities to the limit. 

With foreign funds exiting and now comprising around 25% of volume traded from 50% years before, Philippine penny stocks also reigned during this period.  Many of the popular ones, we considered worthless; however, we see the flourishing of value penny stocks as progress. 

It has been a long while since we called a Buy into Philippine stocks.  In 4Q20, we stayed in the sidelines despite the PSEi’s run as the US stocks, real estate and debt markets created the biggest bubble in financial history.  In 1Q21, we averted risks from the market’s euphoria over the reopening.

Looking forward, we see value-investors remaining on vacation as the US bubble looms over the rest of the world and as local growth dwindles over the slow mass-vaccination process.  It is careless for us to recommend positioning into stocks now when support levels are as flimsy as plywood. 

Besides, what is important now is to get through the pandemic as unemployment and its risks reign and as inflation balloons.  It is essential for everyone to have sufficient buffer for this period before shelling extra funds into stocks, stocks which could be cheaper in 2Q21. 

Even at 2022F PER, the PSEi is as of this time, still at a premium, and our stocks-to-cash ratio is unsubstantial.  It is important to look not just at the PSEi but at the US markets as well for direction and signals on when best to position in stocks in an oversold period. 


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