PH stocks to continue rise on US debt deal

MANILA, Philippines -– The local stock market will get a boost in the coming days from a last-minute deal that ended the US government shutdown and averted a debt default.

But monetary officials said volatility will remain until the US finds a permanent solution to its debt issues.

On the sidelines of the “Rising Stars of the Philippines” forum on Friday, October 18, Philippine Stock Exchange (PSE) president and CEO Hans Sicat said market uptrend is expected in the coming days on easing uncertainties following the US deal.

“With US debt default averted, one more risk factor in the global capital market [was taken away]. Hopefully, it [will] allow local capital markets like us to get on with the fourth quarter,” he noted.

Bangko Sentral ng Pilipinas (BSP) governor Amando Tetangco Jr. said markets have heaved a sigh of relief.

“Its back to risk on for most emerging markets, including the Philippines. The increased appetite is expected to boost financial markets in the short run,” he stressed.

Emerging markets have been on a roller coaster ride since May when US Federal Reserve chairman Ben Bernanke first hinted of a possible tapering of the US economic stimulus.

Markets tumbled on fears the Fed would pull back on its monthly asset-purchasing program, tightening liquidity.

But Bernanke said the pace of the US economy’s growth was sluggish and it wasn’t time to wind down the stimulus.

Markets turned jittery again as a divided US Congress locked in a stalemate over the debt ceiling, risking a disastrous default. However, at the 11th hour, Congress passed and President Barack Obama signed a bill extending the US Treasury’s borrowing authority until February 7.

The bill also allowed the US government to resume operations after a shutdown, which lasted for more than 2 weeks.

Volatility ahead

Tetangco and other officials warned volatility in the markets is still expected as they urged US officials to find a permanent solution to the debt ceiling problem.

“Volatility will likely continue as the market watches where the can is likely going to end up down the road,” Tetangco noted.

BSP deputy governor Diwa Guinigundo said the world may again endure another waiting game when US tackles its budget again.

“We might be back to this wait and see situation by then. Everybody else will have to brace himself for a possible heady ride through market volatilities,” he said.

Finance Secretary Cesar Purisima, for his part, said the US “should look seriously at a more permanent solution to shield the world economy and financial markets from its domestic political squabbles.”

“Because the world’s economies are connected even as far away from the US as the Philippines, every standoff between America’s ruling parties forces the rest of the world to watch with anxiety,” he explained.

Sharpen macroeconomic tools

Guinigundo said the BSP, like any other central bank, needs to sharpen its macroeconomic tools given the uncertainties brought about by policies in the US.

“That will of course require sustained policy reforms, intensified oversight of the financial system, avoidance of asset price inflation, continued fiscal and monetary policy coordination,” he said.

He noted in the meantime, “central banks and government holders of US treasuries will have to make the necessary adjustment, although difficult and options are not readily available.” – Cherrie Regalado, Rappler.com