The year 2020 was not for the faint-hearted investor as a black swan in the form of the new coronavirus (COVID-19) pandemic prompted governments to shut down borders and impose tough local quarantine protocols, wreaking havoc on the global economy and causing a stock market shakeout.
The Philippine Stock Exchange index (PSEi) ended the year at 7,139.71, down by 8.64 percent from the previous year, when the COVID-19 contagion had yet to disrupt the global economy.
The main index, however, recovered 2,516.29 points or a hefty 54.4 percent from the year’s low of 4,623.42 on March 19 during the early days of the quarantine protocols imposed by the Philippine government to curb the COVID-19 public health crisis.
With positive developments on COVID-19 vaccine development and the gradual reopening of the domestic economy since June, the local stock barometer managed to bounce off the year’s lows and trim losses for the year.
AB Capital Securities head of research Jose Vistan said: “2020 was a year that investors want to forget. COVID-19 came and changed what was supposed to be a bullish investment landscape for 2020.”
“The theme for 2021 will be that of reopening and a return to normalcy is not farfetched. Fortunately, bargain-hunters helped end the year positively as COVID-19 trial results suggested that an effective vaccine may be coming in 2021. While there will still be challenges in 2021, we are hopeful that a recovery is highly probable. Fueled by fiscal and monetary stimulus, we should see strong earnings growth, bouncing from a low 2020 base,” Vistan said.
On Tuesday (Dec. 29), the last trading day of the tumultuous year, the PSEi added a modest 17.46 points or 0.25 percent, tracking mostly firmer regional markets.
“The market closed at 7,130 on a positive note with very good volume today. It appears to me that investors were cautiously optimistic in their positioning over the past few days as news report of a next round of lockdowns due to a new strain of the coronavirus tempered risk appetite,” said Manuel Lisbona, PNB Securities president.
Those who were less risk-averse were more selective, favoring off-index bets such as MerryMart or Dito CME to add to their portfolios, he noted.
“This also likely explains the mixed performance of the PSEi names at least for today. Based on our observations of monthly index returns, January has been bullish 67 percent of the time in the last 33 years. Barring any shocks during the coming holidays, the index could renew its run to 7, 200 and beyond with developments relating to the pandemic as the catalyst,” Lisbona added.
Manraj Sekhon, chief investment officer at Franklin Templeton Emerging Markets Equity, said the challenges of 2020 have highlighted structural advantages and other beneficial secular trends in emerging markets that bode well for 2021.
“The resilience of key markets in East Asia during the crisis, paired with their ability to capitalize on secular shifts to the new economy, should drive continued strength next year. For so many different markets across this landscape to concurrently offer compelling investment potential, individually and in aggregate, presents an exceptional investment window, in our assessment.”
The Philippines has fallen into a recession for the first time since 1998 and the pace of decline this year has been the steepest in history at an average of 10 percent in the first nine months. The gross domestic product (GDP) contraction started earlier than expected in the first quarter at 0.7 percent, deepening to 16.9 percent in the second quarter but improving to 11.5 percent in the third quarter.
Consequently, consensus forecasts point to a 47 percent year-on-year decline in full year PSEi earnings per share this year. In the first nine months, only five out of 30 PSEi companies managed to avoid the earnings downturn, namely liquor-maker Emperador Inc., holding firm LT Group Inc., grocery chain operator Puregold Price Club and food and beverage manufacturer Universal Robina Corp. On the other hand, integrated resort operator Bloomberry Resorts Corp., fast-food giant Jollibee Foods Corp. and conglomerate San Miguel Corp. turned unprofitable in the first nine months.