Stocks inch lower on US credit rating downgrade

Philippine shares slipped on Monday as investors monitor the potential impact of Moody’s move to downgrade the United States’ credit rating.

The bellwether Philippine Stock Exchange index (PSEi) inched down by 0.16% or 10.69 points to close at 6,454.84, while the broader all shares index dropped by 0.09% or 3.71 points to 3,765.66.

“The PSEi ended the trading session slightly lower, reflecting the local market’s tepid reaction to Moody’s credit rating downgrade of the US,” Juan Paolo E. Colet, managing director at China Bank Capital Corp., said in a Viber message. “While the downgrade itself was not a surprise, investors are waiting to see whether the move triggers a more adverse movement in US Treasury yields that could potentially unsettle equity markets.”

“Philippine shares tracked global indices lower as investors evaluate credit risks after Moody’s downgraded the US’ credit rating,” Alfred Benjamin R. Garcia, research head at AP Securities, Inc., likewise said.

Moody’s Ratings on Friday cut the US’ long-term issuer and senior unsecured ratings to “Aa1” from “Aaa” and changed the outlook to “stable” from “negative.”

Moody’s said in a statement that the downgrade in US’ rating “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.”

Treasury yields rose and US stock futures slipped with the dollar on Monday due to concerns about US debt and rising deficits after Moody’s downgraded its US sovereign credit rating late on Friday, Reuters reported.

The US 10-year yield rose 7 basis points to 4.51%. The 30-year yield rose above 5% for the first time since April 9, the day US President Donald J. Trump paused most of his so-called reciprocal tariffs for 90 days.

“Philippine shares kicked off the week on a muted note, as the local market continued to digest corporate earnings and monitor potential political shifts post-election,” Luis A. Limlingan, head of sales at Regina Capital Development Corp., added in a Viber message.

Sectoral indices were split on Monday. Property dropped by 1.69% or 39.27 points to 2,272.26; industrials went down by 0.99% or 91.59 points to 9,080.64; and financials declined 0.88% or 21.30 points to 2,397.99.

Meanwhile, mining and oil increased by 1.15% or 104.65 points to 9,184.73; services climbed by 1.14% or 24.45 points to 2,155.34; and holdings firms rose by 1.1% or 59.57 points to 5,475.56.

Value turnover dropped to PHP 6.19 billion on Monday with 755.08 million shares traded from the PHP 6.59 billion with 730.87 million issues exchanged on Friday.

Decliners outnumbered advancers, 109 versus 86, while 49 names were unchanged.

Net foreign selling dropped to PHP 223.77 million on Monday from PHP 406.52 million on Friday. — Sheldeen Joy Talavera with Reuters