Shares fall on selling amid US debt ceiling woes

LOCAL EQUITIES declined on Thursday on increased selling after Fitch Ratings put the United States’ debt on negative watch amid a lack of progress in their debt limit discussions.

The Philippine Stock Exchange index (PSEi) fell by 55.73 points or 0.84% to 6,560.22 on Thursday, while the broader all shares index went down by 28.57 points or 0.81% to end at 3,496.79.

“The market fell below its 6,600 support level as investors dumped shares and pared positions amidst increasing worries about the US debt ceiling situation,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

“Investor anxiety was aggravated by Fitch’s move to place the sovereign credit rating of the US on “rating watch negative,” meaning the country is at risk of losing its prized “AAA” rating if the US debt limit is not lifted. Such a downgrade would roil global financial markets, similar to what happened after S&P’s rating downgrade of US debt in 2011,” Mr. Colet added.

“Local shares were sold down as worries on the US debt ceiling negotiations. For the same reason, Fitch Ratings placed United States’ AAA rating on a negative rating watch as it raised the risks that the government could miss payments on some of its obligations,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan likewise said in a Viber message.

Ratings agency Fitch put the United States’ credit on watch for a possible downgrade on Wednesday, raising the stakes as talks over the country’s debt ceiling go down to the wire, and adding to the jitters in global markets, Reuters reported.

Fitch put the country’s “AAA” rating, its highest rank, on a negative watch in a precursor to a possible downgrade should lawmakers fail to raise the amount that the Treasury can borrow before it runs out of money, which could happen as soon as next week.

A downgrade could affect the pricing of trillions of dollars of Treasury debt securities. Fitch’s move revived memories of 2011, when S&P Global Ratings downgraded the United States to AA-plus and set off a cascade of other downgrades as well as a stock market sell-off.

Back home, all sectoral indices fell on Thursday. Holding firms slid by 74.30 points or 1.12% to 6,542.21; mining and oil decreased by 109 points or 1.07% to 10,059.84; services went down by 16.75 points or 1.07% to 1,545.20; financials declined by 18.27 points or 0.98% to 1,831.92; property shed 19.46 points or 0.71% to end at 2,713.39; and industrials dropped by 27.99 points or 0.29% to 9,349.05.

Value turnover inched up to PHP 3.95 billion with 715.82 million shares changing hands from the PHP 3.8 billion with 750 million issues traded on Wednesday.

Decliners outnumbered advancers, 113 versus 53, while 59 names closed unchanged.

Net foreign buying fell to PHP 21.38 million on Thursday from PHP 71.03 million on Wednesday. — AHH with Reuters