|
|
Monday, July 04, 2005
Shares plunge to six-month low on VAT, political woes (2:30 p.m.)
MANILA -- The Philippine key stock index fell to a six-month low Monday as investors reacted with dismay to the Supreme Court's ruling to halt implementation of a broader value added tax aimed at cutting the nation's fiscal deficit.
Finance Secretary Cesar Purisima at the same time filed a motion asking the High Court to lift the temporary restraining order (TRO) on the implementation of the expanded Value Added Tax (VAT) law.
The benchmark 30-company Philippine Stock Exchange Index plunged 79.58 points, or 4.2 percent, to 1,815.67, its worst close since 1,807.49 on Dec. 23, 2004.
In the last five sessions, the index has last 7.5 percent, the Associated Press reported.
The main contributor to the retreat was Philippine Long Distance Telephone Co., which lost 3.1 percent to close at P1,540, following the 2.4 percent decline in the company's American Depositary Receipts Friday.
Decliners led gainers 106 to six, while 20 stocks were unchanged.
The Supreme Court on Friday stopped the implementation of VAT revisions, which would increase the number of products and services subject to the 10 percent tax to include petroleum products, electric power, airline and shipping fares. The plan is the government's largest revenue-raising measure intended to balance the budget by 2010.
"The court ruling brings the administration's reform efforts back to square one. The market has been riding on the prospect of those reforms being implemented," said Citiseconline.com investment analyst Mark Alan Canizares.
"And we have the political crisis further weighing on the market and keeping buyers and prospective investors away," he added.
AB Capital Securities research director Jose Vistan said the market may continue to pile up losses despite the steep drop.
"The momentum is clearly downwards. The bounce may happen, perhaps once there's a slowdown in the selling momentum," Vistan said. "Fundamentally, there are now a lot of stocks that are ripe for the picking. But it's too risky right now given the situation."
Meanwhile, the finance department filed Monday a motion asking for the immediate lifting of the TRO on expanded tax law given the potential impact to the country’s fiscal reform program.
Purisima estimated that the temporary suspension of the VAT law will cost the government up to P5 billion a month.
"This can result in a serious setback in our fiscal consolidation program. That's why we are going to appeal with the Supreme Court," he said, adding the freeze, although temporary, was enough to erase the government's fiscal gains this year.
Purisima hoped that the High Court will only stop the implementation of the contested provisions and not the rest of the provisions of the law can move forward.
One the debatable provision is the income tax increase that was not part of the original version of the Senate and the House.(Sunnex)
|
|
|
|
