Worries over china virus affect market sentiment

Carlo Lorenciana

THE growing fears on the 2019 novel coronavirus (2019 n-CoV) outbreak could likely hurt the global economy, with Philippine stocks looking to trade weak driven by various economic headwinds.

There’s a rising investor unease in the market, according to Dino Bate, president and chief executive officer at COL Financial Inc.

He said the market’s current weakness is caused by a mix of factors, including the uncertainties created by the virus outbreak which originated in the city of Wuhan in China.

“We see a weak investor sentiment but overall, the outlook for the Philippine economy remains optimistic. It’s too good to ignore,” Bate told SunStar Cebu in a phone interview Tuesday, Jan. 28, 2020.

Marco Nino Velasco, equities investment manager at Unicapital Securities, said the health crisis, which has brought jitters across regions, is posing “some serious threat” to the global economy, although he said the global sentiment is “overreacting.”

“It may affect the global economy. If people get sick, consumption drops and if consumption drops, economic activity slows down,” Velasco said in a separate interview.

He said that the pharmaceutical sector is worth looking at right now. “Once they figure out how to fight the 2019 n-CoV, expect sales to skyrocket.”

“As far as the Philippine Stock Exchange (PSE) is concerned, things may get choppy in the short term,” Velasco said.

In Tuesday’s trading, the benchmark PSE index was down 1.57 percent or 118.93 points to 7,468.70.

Financial markets across the globe were also mostly down, after China warned the deadly 2019 n-CoV was spreading fast.

Analysts said there were growing fears that the crisis could become as bad as the 2003 severe acute respiratory syndrome (Sars) outbreak that hammered markets and the global economy 17 years ago.

The Sars epidemic, which also began in China, spooked investors.

The new outbreak has led China to lock down Wuhan, the epicenter of the disease and home to 11 million people, while imposing tight travel restrictions on a number of other cities.

The outbreak came after the world economy was able to recover from the uncertainty of the months-long war between the US and China after the two signed their first phase trade deal.

Looking forward, Velasco said that the upcoming earnings’ season in February may help spur the market.

Bate is projecting that listed companies would report better earnings for 2019, which should help boost sentiment among investors.

“Optimism remains as far as our economy is concerned,” said Bate, citing the early approval of the 2020 state budget and the continued business expansion in the country as among the key drivers.

Velasco echoed this outlook.

“As an economy, I think the outlook looks great. Forecasts of financial institutions are more than six percent gross domestic product growth for the Philippines this year. However, there are a lot of challenges,” he said.