Bargain hunting saves PSEi, telco shares from post-SONA sell-off

Bargain hunting saves PSEi, telco shares from post-SONA sell-off

MANILA, Philippines — Local shares bounced back from a dismal start on Tuesday led by telco firms attacked by President Rodrigo Duterte during his fifth State of the Nation Address that hardly offered reasons to investors to calm their nerves.

Bargain hunting for cheaper stocks was the sole reason for the Philippine Stock Exchange index (PSEi)'s late-hour rally on Tuesday, closing up 1.13% to 5,927.11. The broader all-shares index went up a smaller 0.74%.

All sub-indices ended in green led by mining and oil which gained 1.29%. Telco shares at PLDT Inc. and Globe Telecom Inc. also reversed earlier drops in the day prompted by Duterte’s threats to confiscate their properties if they fail to improve service by December. 

Specifically, Pangilinan-led PLDT went up 0.53% to P1,327 each, while Ayala-led Globe  trimmed losses to end the day down just 0.50% to P2,000 apiece.

“Bargain hunting after the sell-off earlier in the session and yesterday lifted the bourse supported by the gains of the heavyweights in the market,” Cara Alviar, research associate at Philstocks Financial Inc., said in a text message.

The belated rally, however, did not change the fact that investors were “disappointed” by SONA’s lack of concrete plans to resuscitate an economy that most likely entered a recession in June, following a 0.2% slump in the first quarter.

Ahead of the ghost month of August, when investors tend to go on the sidelines, PSEi has diverted from a broader rally among peers, signaling confidence has yet to return to the market despite the lifting of lockdowns. On Tuesday, foreign investors were still net sellers amounting to P415.6 million.

“The bourse traded in the red in the earlier session amid mixed sentiment from the SONA. Negative sentiment was spilled after the President attacked telco companies and the oligarchs including those owning power, electricity, and water firms,” Alviar said.

CREATE, Bayanihan II still seen beneficial

A total of 1.96 billion shares, valued at P4.3 billion, changed hands during the trading day. Alviar said the “tepid” value turnover indicates that “most investors are still on the sidelines waiting for the next quarantine measures after they got no clue from the SONA.”

The government is set to announce new quarantine regimes over the next two weeks by month’s end, and investors are concerned that the recent spike on coronavirus cases would prompt a return to tighter lockdowns, particularly in the business center, Metro Manila.

For his part, Luis Limlingan, managing director at Regina Capital brokerage, said PSEi reversed earlier losses in expectations lawmakers would quickly passed the Bayanihan to Recover As One and Corporate Recovery and Tax Incentives for Enterprises (CREATE) bills. 

While lacking in fiscal firepower, Alviar explained CREATE’s passage and that of so-called Bayanihan II would “spur positive sentiment” in the market. The tax incentives bill, in particular, is expected to generate savings for corporates whose second-quarter balance sheets have shown extensive damage from the outbreak.

“It would be really helpful on the bottom line of the companies,” she said.