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Decision on VAT strengthens peso
The peso strengthened on Tuesday after the Supreme Court lifted its suspension order on the expanded value-added tax (EVAT) law, but Philippine share prices were flat as the market closed hours before the Court handed down its verdict on the tax measure.
At the Philippine Dealing System, the local currency closed at 55.78 to the dollar, higher than Monday’s closing price of 55.815. It opened at 55.840, traded to a high of 55.67 and to a low of 55.870. The amount of transactions reached $347 million.
Despite the Philippine unit’s renewed strength, traders expect it to weaken until November due to the onset of the import season.
"The market has anticipated the VAT law to be implemented. However, the peso will go back to 56 soon due to the importation season," a currency dealer said. "The peso will improve in December [and] reach 55.50 by year-end."
At the Philippine Stock Exchange, share prices closed flat as investors kept to the sidelines, awaiting a Supreme Court decision on the VAT law, dealers said. The Philippine Stock Exchange composite index fell 0.13 points to 1,947.33 after trading between 1,943.91 and 1,949.82.
Volume turnover amounted to 287.01 million shares worth P498.24 million ($8.9 million).
The all-shares index gained 1.54 points to 1,180.80.
Losers outnumbered gainers 27 to 23, while 65 stocks were unchanged.
Continuing political tension exacerbated by a series of street protests seeking President Arroyo’s ouster also sidelined investors.
"Right now, there’s a lack of interest in the market. People have become more selective, and the political noise has contributed much to this," said Mark Alan Canizares of Citiseconline.com.
SM Investments Corp. was top-traded, rising P4 to P218.
However losses in First Philippine Holdings Corp. pulled down the main index as the stock fell by P2 to P42.
SM Prime Holdings Inc. ended unchanged at P7.30 while Banco de Oro Universal Bank was flat at P31.
Philippine Long Distance Telephone Co. closed steady at P1,660 after a two-day slide.
San Miguel Corp. saw its A shares, exclusive to Filipinos, remain at P65 while its B shares, available to foreigners, slipped 54 centavos to P92.
More resources for job-creation, delivery of key services
Finance Secretary Margarito B. Teves said the VAT law will be implemented starting November 1.
The tax law is projected to generate P4 billion this year, and P82 billion next year, given a 70-percent compliance rate.
Teves said the Department of Finance will push for the VAT on power and petroleum products next year, by which time the government will raise the tax rate to 12 percent from the current 10 percent.
"The lifting of the temporary restraining order will help reduce the fiscal deficit and allow more resources for job-creating infrastructure and delivery of key service," he said.
Maricel E. Burgonio with AFP
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