STOCK-MARKET OUTLOOK

LAST WEEK

Share prices recovered last week with the main index staying at the 6,800-point level, as investors were elated by the arrival of the vaccines, but the gains were pared by the end of the week following the announcement that inflation accelerated in February.

The benchmark Philippine Stock exchange index (Psei) gained 86.51 points to close at 6,881.37 points.

The main index was up during the first three days of trading before succumbing to profittaking starting Thursday.

average daily trading for the week was at P7.99 billion, while foreign investors were net sellers at P2.77 billion. Other subindices posted gains with the exception of the Mining and Oil index which plunged 477.21 points to close at 8,854.46 points. The broader all Shares index rose 38.24 to 4,158.54, the Financials index added 0.43 to 1,477.62, the Industrial index increased 131.34 to 8,786.68, the holding Firms index climbed 139.15 to 7,059.23, the Property index gained 22.67 to 3,479.81 and the Services index was up 11.27 to 1,464.63.

For the week, gainers led losers 127 to 103 and 25 shares were unchanged.

Top gainers for the week were Boulevard holdings Inc., abra Mining and Industrial Corp., Prime Media holdings Inc., ace enexor Inc., City and Land Developers Inc. and Concrete aggregates Corp. B. Top losers were Da Vinci Capital holdings Inc., Pacifica holdings Inc., Philippine estates Corp., Marcventures holdings Inc., Global Ferronickel holdings Inc. and Keppel Philippines holdings Inc. a.

THIS WEEK

Share prices may continue its downward trend this week as the rising inflation rate is starting to worry investors.

Inflation for February came in at 4.7 percent, from 4.4 percent in January. This was the highest since 2019, mainly as a result of higher prices of pork and petroleum products.

“Ultimately, the market will have to deal with the possible rate squeeze that this may entail. With the BSP [Bangko Sentral ng Pilipinas] monetary policy just around the corner [March 25], expect funds to run more prudent trading policies. even if dovish rates are maintained, transitory inflation will impact margins negatively, on top of already frail consumer confidence,” online broker 2Tradeasia said. Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financials Inc., said the resurgence of Covid-19 cases including the increasing number of those with the more infective strains from the United Kingdom and South africa may weigh on market sentiment due to the adverse impact it can have on the economy.

“This includes dented consumer and business confidence, as well as the risk of reimplementation of strict social restriction measures. Investors are also expected to monitor the movement of the US bond yields. a further rally in the said yields may lead to more foreign fund outflows which would intensify selling pressures,” he said.

Investors are also expected to take cues from the upcoming corporate earnings reports and employment figures next week.

The Psei’s support is seen at 6,600, while resistance is seen at 6,900, he said.

STOCK PICKS

Broker Philstocks said Philippine National Bank is seen to benefit from the expected recovery in bank lending this 2021 amid improving economic sentiment.

“risks coming from bad loans are expected to remain elevated, however, which in turn is seen to weigh on the bank’s recovery,” it said.

PNB’S price to earnings ratio in its 2020 close of 29.35 was at 6.14 times, below its 2015 to 2019 average of 7.88 times. Meanwhile, its price to book ratio at the said close stood at 0.29 times, below its 2015-2019 average of 0.53 times. This shows that PNB is undervalued based on historical average, it said. It placed a target price of P36.80 on PNB shares. PNB shares closed Friday at P25 apiece.

Meanwhile, the broker also recommended buying the shares of Security Bank Corp. (SECB), whose shares are also undervalued based on its historical price to earnings and price to book ratio.

Its price to earnings ratio at the close of 2020 at P134.50 was 11.18 times, below the 2015 to 2019 average of 14.72 times.

“Moving forward, SECB is expected to return to its growth trajectory this 2021 amid the pickup in bank lending stemming from the expected rise in business and consumer confidence. Loan loss provisions may continue to weigh on the bank however amid elevated default risks, tempering its recovery,” it said.

The broker set a target price of P62.30 on the bank.

Security Bank shares closed last week at P128.10 apiece.