OCTA Research came out to say that a hard lockdown may be needed to avoid exceeding medical capacity in the coming weeks. OCTA also said that the sooner we lock down the better, as a prompt lockdown would minimize the length of the lockdown and minimize the economic destruction to business activity as a result.
After initially rejecting calls for a lockdown, “business leaders” (voiced by Joey Concepcion) supported a 2-week lockdown to start in August, with one week for businesses to prepare. Mr. Concepcion was reported to have reasoned that it was best to act quickly now to “save Q4”. As of last night, however, the Palace was still against a hard lockdown and the DOH was still unable to confirm a “surge” in cases due to the Delta variant.
MB BOTTOM-LINE
As investors watched our ASEAN neighbors succumb to strong new waves of infections due to the Delta variant (and one “first” wave in Vietnam), many appeared to be backing out of positions on the PSE, perhaps anticipating that the Philippines would have a similar experience with the variant. Fears of a future lockdown. The PSE has fallen 543 points over the past three weeks; instead of setting our sights higher after we’d just crossed the 7,000 mark for the first time in almost half a year, we’re looking into the cloudy future and wondering if we aren’t headed below 6,000 sometime soon. Politics and health policy aside, a lockdown of any kind will cause economic destruction. We already learned that even a short lockdown (as we saw for the final three weeks in Q1/20) can absolutely nuke quarterly earnings reports.
Whether or not we “should” lockdown is not necessarily important to investors right now; simply recognize that it could happen, and that if it does happen, it will probably be beneficial to take a look back at how certain stocks and certain sectors weathered the lockdown. If a hard lockdown happens, every stock will suffer, but some will suffer far less than others, and others still will have learned from the original painful experience and implemented changes that could minimize losses in future lockdowns.
If things continue to progress as they have, those plans will be tested in short order. Investors: be prepared.
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