By Honey Madrilejos-Reyes
Reporter
AS the PSEi breached the 3,000-point level in nine years, one of the country's leading brokerage firms said on Wednesday that 2007 would be another banner year as "the virtuous cycle of fiscal reform, improved credit standing, lower interest rates, stronger peso, lower inflation, faster economic growth and lower unemployment would be sustained."
In an interview Wednesday, ATR Kim Eng regional economist Luz L. Lorenzo said the tax reforms which served as the main triggers last year would be supplemented by reforms in public spending and in specific industries that would improve economy-wide efficiencies.
The PSEi closed Wednesday above the 3,000-point mark at 3,020.70 points or 43.85 points higher than its 2,976.85 level last Tuesday—the first time that the Index closed above the 3,000-point level since it ended at 3,060.59 points on April 4, 1997.
"Our market is off to a good start in 2007, and the strong finish of the PSEi has buoyed up our expectations that the New Year will usher in more growth for the local stock market," PSE president Francis Lim said in another interview.
Lorenzo said the increases in tax revenues last year plus the reduction in national debt ratios as a result of debt prepayments would finally allow for real increases in public spending that the country has not enjoyed since the Asian crisis.
"This would lead to the upgrading of basic physical and social infrastructure that, if sustained, would raise the productive capacity of the economy and elevate potential GDP growth in subsequent years," Lorenzo noted.
She projected that substantial increases in government spending, particularly public investments on physical infrastructure, education and health services, would materialize this year as tax revenue growth remains robust on the back of sustained improvements in tax collection efforts.
"I think domestic spending would offset the projected reduction in exports that would be triggered by slowdown in the US economy," Lorenzo added.
For his part, ATR Kim Eng Financial Corp. executive vice president Renato Leveriza said the capital market is also seen to expand as the economy continues to grow.
The market's performance reflects the continued confidence of investors in the country's favorable economic prospects, which are perceived to have significantly improved as an offshoot of welcome reforms in the government.
"We believe that our own reform initiatives within the PSE, coupled with proinvestor policy changes being implemented by the government, will help the local stock market replicate, if not surpass, the 42-percent growth rate it enjoyed in 2006," Lim added.
The 9-year high in the stocks performance followed a government announcement that it expected faster economic growth to boost tax revenue by 21 percent in 2007.
Lim, meanwhile, reiterated the PSE's commitment to pursue more reforms designed to further deepen investors' faith in the integrity and efficiency of the stock market's operations.
"We have faith in our market's potential to contribute more for the economy, as long as we can keep out unwelcome developments from transpiring and we keep in place consistent and predictable policies in government this year."
Business Mirror
January 4, 2007
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