Fitch downgrade spooks local stock market

Share prices on the Philippine Stock Exchange bled on Tuesday, triggered by the credit outlook downgrade by Fitch Ratings on the country.

The benchmark PSEi shed 118.74 points or 1.72% to 6,795.13 at the closing bell. The broader All Shares lost 54.26 points or 1.27% to close at 4,215.76.

“Philippine shares fell as Fitch Ratings maintained its investment grade ‘BBB’ credit rating for the Philippines but revised its outlook to ‘negative’ from ‘stable,’ citing the impact of the prolonged pandemic,” Regina Capital Development head of sales Luis Limlingan said.

“The downward revision 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,” he said.

Debt watcher Fitch Ratings lowered the Philippines’ credit outlook to negative from stable, reflecting the “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.

Limlingan said the implications of the credit outlook downgrade means Fitch may downgrade the Philippines’ credit rating if it reverses reforms or departs from the prudent macroeconomic policy framework that leads to continued higher fiscal deficits. 

Rizal Commercial Banking Corporation chief economist Michael Ricafort said an actual credit rating downgrade may increase the country’s borrowing costs such as interest rates or credit costs.

Nonetheless, Ricafort said that “there is still a chance to prevent an actual downgrade of the credit rating from happening in the coming months, as the Philippine would remain in the investment grade universe, regardless of the outcome, especially if economic recovery prospects improve in view of the continued arrivals of more COVID-19 vaccines into the country that could help better manage, if not reduce, new COVID-19 local cases…”

More than 1.886 billion shares valued at P5.779 billion, changed hands. Decliners led advancers, 125 to 66, and 51 issues were unchanged. — BM, GMA News