Financial Blog

Last year, the spread of COVID-19 in the country peaked at around August 2020. The one-day record of 6,958 new cases also occurred during that month. The 7-day moving average of daily new cases – a metric that smoothens out sudden spikes or dips in the data – also never went below 3,000 for a duration of 5 weeks, or from early August to early September. As a result, hospitalization rates increased which led capacity utilization to reach critical levels prompting the government to revert to more stricter lockdown similar when the pandemic started. Another spike in cases took place later in September, after which the numbers started tapering-off until December where it stayed between 1,000-2,000 average cases per day leading to mobility restriction being eased and social distancing measures being relaxed. At the height of the pandemic, the PSEi declined by more than 40% but gradually recovered as the numbers of new cases started to decline. If one were able to invest in an index fund during the lowest close of the PSEi at the height of the pandemic, the investor would have been rewarded with a 54% return when the index recovered back to 7,139.71 level at end the 2020.

However, barely 3 weeks into March, the caseload hit 71,714, a big jump to the caseload of 50,734 in February. This was partly due to the advent of new COVID-19 variants which experts believe to be more transmissive. The country’s 7-day moving average of new cases rose to 6,042 breaching the highest 7-day average registered last year. Likewise, hospital utilization rates have again risen to critical levels prompting the government to once again impose localized lockdowns and mobility restrictions in areas with widespread transmission. As a result, as of March 23, the PSEi index has declined by 9.7% year-to-date as investors priced-in the uncertainty brought by the resurgence of COVID-19 cases as well as the impact of the lockdown to the economy

The silver lining to the recent rise in COVID-19 cases is the government’s vaccination roll out which started this month. As of March 15, the government has already administered 193,492 doses and 90% of their stocks have already been distributed to the vaccination sites. Recall that the government is looking to procure a total 148m doses this year to vaccinate 50m to 70m Filipinos to achieve herd immunity by the end of this year. 600k and 525.6k doses of the Sinovac and AstraZeneca vaccines have already arrived in the country, respectively, and more doses are expected to trickle in the next couple of weeks. In terms of the rollout, the government is initially targeting to administer at a rate of 100k-200k doses per day and ramping it to 500k to 1m doses per day by April/May. The economic recovery is greatly contingent on the success of the vaccine roll out.

Our view is that these lockdowns are necessary steps for us to be able to control the uptick in new cases while the government starts rolling out their COVID-19 vaccine plans. Only time will tell how the PSEI will perform but taking into account the positive developments of the vaccine front, we believe that current index levels presents a good entry point for investors who missed the 4th Quarter last year. Market volatility is inevitable in the short term, but we believe that in the long run as more and more people get vaccinated and the economy starts to reopen, the stock market will eventually recover. In the midst of every crisis, lies great opportunity.