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Philippine shares fall on Fitch ratings

Philippine shares

The credit ratings agency lowered its outlook to ‘negative’ from ‘stable’, citing weakening fiscal finances and increased credit profile risks

Philippine shares dropped over 1% on Tuesday as credit ratings agency Fitch downgraded its outlook on the country, stoking fears that other agencies would also lower their view of the economy which has been battered by the Covid crisis.

On Monday, Fitch lowered its outlook to ‘negative’ from ‘stable’, citing weakening fiscal finances and increased credit profile risks, though it affirmed Philippines’ investment grade score.

Equities in Manila gave up on Monday’s gains even as officials quickly downplayed the revision and insisted the drag from the pandemic, which led to a record 9.6% economic contraction in 2020, was transitory.

Market reaction was expected as investors now fret possible action from either Moody’s or S&P in the near term, said Nicholas Mapa, a senior economist at Dutch bank ING.

Mapa said Philippines’ elevated debt-to-GDP and deficit-to-GDP levels would likely deteriorate in the coming months and he did not expect a substantial pickup in growth momentum as the nation grapples with pandemic-led curbs.

Elsewhere in the region, Indonesia’s stocks dropped slightly, a day after the central bank cut its forecast for 2021 economic growth and amid another record daily rise in COVID-19 cases.

Moves in other emerging Asian markets were mild as investors awaited inflation data from the US later on Tuesday and US Federal Reserve Chair Jerome Powell’s testimony this week for cues on early tapering.

South Korea’s was 0.2% higher, the KOSPI index gained 0.8% to lead gains in the region, while stocks in Taiwan and Singapore added 0.6% each.

A higher-than-expected core inflation reading from the United States may stoke inflation concerns and lead the U.S. dollar higher, weighing on equity markets, said Margaret Yang, a strategist at news and research website DailyFX.com.

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