Delta variant to remain a concern for investors

PHILIPPINE shares are seen to be hounded anew this trading week by worries caused by the detection of more Delta variant cases in the country.

The benchmark Philippine Stock Exchange index (PSEi) finished down the 6,600 territory on Friday after concerns on the Delta variant increased selling pressure and slumped the market by 0.51 percent or 34.1 points to close at 6,693.83.

Senior research analyst Japhet Tantiangco of Philstocks Financial Inc. expects the worries on the Delta variant to still linger in the market this week.

Tantiangco said the local transmission of the variant of concern raises fears of resurgence in the number of coronavirus disease 2019 (Covid-19) cases, which could lead to a reimposition of stricter quarantine measures and eventually a delay in the Philippine economy’s recovery.

“These fears are seen to weigh on the local market, which may lead to declines,” he explained.

The Department of Health on Friday reported 16 additional cases of the Delta variant in the country, including 11 local cases, bringing the current total to 35.

Effects of peso weakening

The recent weakening of the Philippine peso is also seen discouraging foreign investors from injecting funds in the local market, which in turn could also negatively affect the market.

“If the peso declines further this week, then we may see more foreign fund outflows from the market,” Tantiangco said.

The local currency remained in the P50 level as it closed at P50.235:$1 on Friday against the P50.22:$1 the previous day.

Foreign funds are on a selling spree as the market recorded net outflows of P939.35 million on Friday.

Investors are also expected to monitor the results of the corporate financial earnings for the second quarter.

“Given these, we may still see tepid trading this week,” Tantiangco noted.

Tantiangco set the main index’ initial resistance at its 50-day exponential moving average, currently at 6,771.26, followed by its 10-day exponential moving average, currently at 6,830.45.

Initial support, meanwhile, is seen at its 200-day exponential moving average, 6,670.01 as of July 16, which could be tested this week.

“If the market fails to hold its position above its 200-day exponential moving average, it may fall to its next support at the 6,600 level,” Tantiangco added.

The trend in the new Covid-19 variants that are more contagious and the developments in the tally of virus cases are also among the major local catalysts that Rizal Commercial Banking Corp. chief economist Michael Ricafort cited for the market this week.

Ricafort also included the release of some major economic data, including balance of payments and budget deficit, positive developments in the country’s inoculation program and any additional measures to further reopen the economy, among others.

“For the coming weeks or months, new local Covid-19 cases have already consistently eased or improved to less than half of the record high of 15,298 posted on April 2 on a daily basis... but could be threatened by the more contagious variants (Delta, Lambda) as new Covid-19 cases still need to ease or improve further while awaiting for the expected increase in Covid-19 vaccine arrivals and rollouts... in able to better justify any further measures to re-open the economy, thereby would help support better economic recovery prospects as well as investment valuations,” Ricafort said in an email.