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The market is expected to track developments in containing the 2019 coronavirus disease pandemic (Covid-19) and economic recovery as we enter the first week of operations in 2021.
The benchmark index of the Philippine Stock Exchange (PSEi) ended last year slightly higher, as it rose 0.25 percent or 17.46 points to finish at 7,139.71 on Tuesday.
The market’s year-end close is a 76.8 percent improvement from its low of 4,039.15 on March 19, but 9.5 percent lower than its 52-week high of 7,890.94 posted. January 3.
Research from AAA Equities said there is a greater chance that the major index will move sideways between its support at 7,000 and its resistance at 7,300.
“However, we are also facing another scenario. The optimism of entering the new year may result in greater volatility for blue chips and the market resuming its uptrend, ”he continued.
AAA Equities noted that the market’s lateral movement during the last weeks of December was triggered by uncertainties in the Covid-19 pandemic, which they expect to continue into the first weeks of 2021.
He added that most investors would also keep an eye on how much business activities recovered in the fourth quarter to gauge the recovery in the economy.
“Investors need to have a clearer picture of where the economy will be, which will determine equity risk appetite,” the research said.
The national government has announced that Metro Manila and nine other areas will remain under general community quarantine until the end of January.
The government also expanded travel bans imposed on more countries, which initially only involved the UK, following the emergence of the new Covid-19 strain.
Meanwhile, Rizal Commercial Banking Corp. chief economist Michael Ricafort said further measures to reopen the economy “would help support better prospects for economic recovery as well as investment valuations.”
He cited upcoming developments that could affect the economy and financial markets, including anticipating an increase in remittances abroad and converting pesos during vacations; possible approval of a one-year extension of the validity of the 2020 national budget fund until the end of 2021; and the six-month extension of the Bayanihan for the Recovery Act as one or the Bayanihan Act 2; and progress in the approval of the Law of Corporate Recovery and Tax Incentives for Companies and Strategic Transmissions of Financial Institutions.
Ricafort also noted that progress in the development and deployment of Covid-19 vaccines and the trend in new cases of local viruses may affect market confidence.
He added that the new variant of Covid-19, which could lead to new roadblocks and travel restrictions, could be a compensating risk factor, as it could slow down the prospects for economic recovery.
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