THE REIMPOSED enhanced community quarantine (ECQ) in NCR Plus, which includes Metro Manila and nearby provinces of Bulacan, Cavite, Laguna, and Rizal, amid rising coronavirus disease 2019 (COVID-19) infections is expected to dampen investor sentiment this week.
The benchmark Philippine Stock Exchange index (PSEi) inched down by 36.37 points or 0.55% to close at 6,544.63 on Friday.
Week on week, the index gained 108.53 points from its 6,436.10 close on March 19.
“The market went up 1.7% [last] week mainly on optimism after the status of vaccine rollout and deliveries was presented,” AB Capital Securities, Inc. Junior Equity Analyst Lance U. Soledad said in a Viber message. “The run-up was not supported by heavy volume as investors [stayed] on the sidelines given the spike in daily COVID-19 cases, with active cases at all-time high.”
This week, market sentiment will take a hit from the return of stricter lockdown measures, analysts said.
“The PSEi could correct lower largely due to the one-week enhanced community quarantine in NCR Plus that may reduce production, sales, income or livelihood of hard-hit businesses, industries, sectors that lead to lower valuation for some adversely affected listed companies,” Michael L. Ricafort, chief economist at the Rizal Commercial Banking Corp. (RCBC), said in a text message on Sunday.
China Bank Securities Corp. Research Associate Jason T. Escartin expects the move to “worsen selling pressure,” citing its adverse effect on investor sentiment.
Manila and nearby provinces will return to stricter quarantine measures from Monday, a senior official said on Saturday, as the Philippines battle to contain a surge in COVID-19 cases that has strained hospitals, Reuters reported.
Presidential spokesman Harry Roque said the measures, which will be in place until April 4, will ban non-essential movement, mass gatherings, dining in restaurants. They represent a further tightening of curbs imposed on March 22.
“Given the shortened trading week, which will likely be accompanied by lower trading volumes, and developments over the weekend, we think the PSEi may find some footing in the 6,000-6,200 support zone,” Mr. Escartin said via e-mail.
“Through the trading week, we will likely see investors progressively price in the possible next steps after the week-long ECQ, taking their cue from daily case counts and health-care capacity utilization,” he added.
RCBC’s Mr. Ricafort said the PSEi’s expected slump may be offset by the signing of the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act.
“[It] may reduce the corporate income tax rate of the biggest companies or businesses and correspondingly increase their net income by five percentage points and a bigger 10 percentage points for MSMEs (micro, small and medium enterprises), thereby [helping]… offset the adverse business or economic effects of the one-week ECQ,” he said. — Keren Concepcion G. Valmonte with Reuters