Philippine stocks slipped more than 1 percent on Tuesday after 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 coronavirus pandemic.
Fitch on Monday lowered its outlook to 'negative' from 'stable', citing weakening fiscal finances and increased credit profile risks, though it affirmed Philippines' investment grade score.
The PSE index lost 118.74 points or 1.72 percent, while the broader All Shares index lost 54.26 points or 1.27 percent.
Equities in Manila gave up all of Monday's gains even as officials quickly downplayed the revision and insisted the drag from the pandemic, which led to a record 9.6 percent 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 the 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 were modestly lower, a day after the central bank cut its forecast for 2021 economic growth and as the largest Southeast Asian economy saw another record daily rise in COVID-19 cases.
Moves in other emerging Asian markets were mild as investors awaited inflation data from the United States later on Tuesday and Federal Reserve Chair Jerome Powell's testimony this week for cues on early tapering.
South Korea's won rose 0.2 percent and the KOSPI index added 0.8 percent to lead gains in the region, while stocks in Taiwan and Singapore gained 0.6 percent each.
A higher-than-expected core inflation reading from the United States "may stoke inflation concerns and lead the US dollar higher, weighing on equity markets," said Margaret Yang, a strategist at news and research website DailyFX.com.