Business Mirror
April 26, 2006

RP stocks post biggest fall in 7 weeks

 

PHILIPPINE stocks on Tuesday fell the most in seven weeks on speculation efforts to trim the budget deficit could stall after the government said it may reduce taxes on oil to offset rising fuel prices. Philippine Long Distance Telephone Co. and Ayala Corp. declined.

The Philippine Stock Exchange Index fell 17.93, or 0.8 percent, to 2,232.55 at the noon close in Manila, its biggest drop since March 8.

Finance Secretary Margarito Teves said the government may reduce tariffs on oil imports to soften the impact of rising oil prices on consumers. He also said the government will “explore other options first” before scrapping a value-added tax, or VAT, on oil products. VAT is a bigger levy than the tariff and a key component of the government’s fiscal program.

 “They aren’t totally saying they will not touch the VAT on oil and that is a concern for the market,” said Erick Tan of BPI Asset Management Inc. “There is no definite statement from the government that they won’t do it and that’s causing some of the sell-off.”

The government in 2005 included oil products among the goods and services covered by VAT to help trim the budget deficit. Earlier this year, the government raised VAT to 12 percent from 10 percent as part of its plan to boost revenue.

PLDT fell P5, or 0.3 percent, to P1,985. Globe Telecom Inc., its second-largest phone company, fell P15, or 1.7 percent, to P870.

 “The signal is that the government may backtrack on parts of the fiscal reform,” Tan said. “That isn’t a good signal for investors who bought the story of fiscal reform and improving government finance.”

Ayala Corp. fell P10, or 2.8 percent, to P350, its biggest decline since February 24. Bank of the Philippine Islands fell 50 centavos, or 0.8 percent, to P61.50, its first decline in five days.

Shares worth P2.82 billion (US$454 million) were traded, double the six-month daily average and the biggest since March 31.

Equitable PCI Bank fell P1.50, or 2.1 percent, to P70, its biggest decline in two weeks after smaller rival Banco de Oro said it didn’t make an offer to buy a 12-percent Equitable stake at P92 or P95 share. Banco de Oro was unchanged at P35.50. Bloomberg

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