MANILA, Philippines — Philippine shares bucked a regional uptrend to close lower on Tuesday, as investors sold on Fitch Ratings’ announcement that raised the specter of a credit rating downgrade for the country.
The bellwether Philippine Stock Exchange index shed 1.72% to close at 6,795.13. The broader All-Shares index lost a smaller 1.27%.
The main index’s slump defied a regional rally that stems from optimism about the upcoming earnings season. Hong Kong led the gains in Asia, rising more than one percent, while Tokyo, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei and Jakarta also enjoyed big gains.
“Philippine shares fell as Fitch Ratings maintained its investment grade ‘BBB’ credit rating for the Philippines but revised its outlook to ‘negative’ from ‘stable,’” Luis Limlingan of Regina Capital brokerage in Manila said in a market commentary.
A negative outlook on the Philippines means there’s a possibility that country’s credit rating would be downgraded over the next 18 to 24 months. A lower rating, in turn, could make borrowing money from foreign investors more expensive for both the government and local companies.
The last time the country's credit rating was downgraded was in 2005 amid a political crisis during the administration of Gloria Macapagal-Arroyo. Explaining its decision, Fitch said the negative outlook “reflects increasing risks to the credit profile from the impact of the pandemic and its aftermath on policy-making as well as on economic and fiscal out-turns.”
The announcement was enough to turn foreign investors into sellers, yielding a net foreign selling of P1 billion. A total of 1.89 billion shares valued at P5.78 billion switched hands during the trading day.
All sectoral counters were in the red led by property firms, which lost 2.01%.