The local stock market fell after the outlook for the country’s credit rating was downgraded by Fitch Ratings.

The PSEi lost 118.74 points or 1.72 percent to close at 6,795.13 as the Property and Holding Firms sectors led the retreat across the board.

Volume was higher but still thin at 1.89 billion shares worth P5.78 billion as losers trounced gainers 125 to 66 with 51 unchanged.

“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,” said Regina Capital Development Corporation Managing Director Luis Limlingan.

He explained that, “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."

The “negative” outlook 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.

Philstocks Financial Research and Engagement Officer Claire Alviar said “A lower credit rating is expected to adversely affect our borrowing cost which is not welcome amid challenging times and a struggling economy.”

AAA Equities Head of Research Chris Mangun said “The market gave up all its gains from the previous session which is proof that investors are anxious at current price levels.“

He noted that, “Although there wont be any impact until the credit rating is downgraded, the report put a negative spotlight on the economy and made some investors nervous. The potential downgrade resulted in a surge of demand for short-term government T-bills in its last auction.”

Mangun added that, “Some investors may opt to go for safer instruments and forego riskier equities. If we continue to see a lack of buying, the increased selling pressure will push prices lower.”