US debt ceiling to weigh on local bourse

THE LOCAL stock market is closed today due to a national holiday in observance of the Islamic Feast of Sacrifice or “Eid-ul Adha” or Feast of Sacrifice.

Nevertheless, all eyes are on budget discussions in the United States ahead of the Oct. 17 deadline to raise the debt ceiling and avoid a sovereign debt default.

Before the local equities market paused for a holiday, the main- share Philippine Stock Exchange index lost 47.1 points or 0.73 percent to close at 6,442.70 in thin trade on Monday.

In a research note, DA Market Securities noted that in August 2011, the US faced a similar fiscal deadlock and managed to raise the debt ceiling only hours before the deadline which led to a credit rating downgrade by the S& P and a sharp correction in markets.

“While the possibility of default is remote, it would have devastating consequences; a possible delay, and a significant reaction as well. However, amid the concerns in the US, it is important to note that the Philippine market has been resilient. In this respect, we think that volatility stemming from externally led factors continues to provide the right opportunity to buy on dip/ volatility,” the local stock brokerage said.

After the market’s recent rebound, DA Market said the next resistance levels would be at 6,600 then 6,800, providing shorter- term investors the chance to take profit at those levels and possibly buy back on a retest of supports at 6,300 and 6,100.