Sideways trading seen; eyes on release of GDP

Share prices will likely trade sideways ahead of the release of the gross domestic product figures for 2020 by the end of the week.

“While negative figures may have already been baked-in in share prices, any downside surprise will be detrimental to already directionless sentiments, particularly for cyclicals and recovery-related shares,” online brokerage firm 2TradeAsia.com said.

The country’s GDP declined by an average of 10 percent in the first three quarters of 2020, with government’s economic managers expecting the full year GDP to decline  8.5 percent to 9.5 percent.

Also negatively affecting investor sentiments is the risk of rising COVID-19 cases in the country that could lead to implementation stricter quarantine measures. Tougher quarantine rules could defer the government’s move to further re-open the economy and delay the recovery.

BDO Unibank Inc. chief investment strategist Jonathan Ravelas said investors were awaiting further details on vaccine distribution and assessing the effectiveness of the current pandemic containment measures to prevent the transmission of the new COVID-19 variant.

Worries over the rise in the inflation rate and moves to amend the constitution are also weighing on the market. Several  business groups last week opposed the proposed amendments to the constitution ahead of 2022 presidential elections.

The country’s inflation rate quickened in December to 3.5 percent, driven by higher food prices and transport costs. Reports of continued rise in prices of basic commodities, like pork and vegetables, even after the holiday season due to supply issues could push the inflation rate higher in January.

The Philippine Stock Exchange Index last week dropped 2.7 percent to 7,045 on heavy foreign selling.

All sectorial indices posted week-on-week declines, led by mining and oil (-6.3 percent), property (-3.43 percent) and industrial (-3.21 percent)

The average value turnover improved to P12.67 billion but the average net foreign selling widened to P960 million.

Meanwhile, global stocks mostly fell Friday as investors fretted about the economic impact of fresh virus shocks amid worries that newer COVID-19 strains may be even more deadly than earlier ones.   

A raft of economic data highlighted the worsening situation for Europe, which is on course for a double-dip recession as new COVID lockdowns hit hard, although US data were relatively strong.

British Prime Minister Boris Johnson warned a newer COVID-19 strain may be more deadly, while US President Joe Biden said fatalities in the hard-hit country are expected to exceed 600,000.

The tech-rich Nasdaq edged to a fresh record in the United States, but the Dow retreated, along with bourses in Europe.

“The optimism of earlier in the week has evaporated,” noted Chris Beauchamp, chief market analyst at IG trading group.

A closely watched survey of eurozone business activity showed the slowdown accelerated in January, confirming worries about the hit from the latest COVID-19 restrictions. With AFP