Market continues to drop as high oil prices dampen sentiment

Share prices closed 0.62 percent lower yesterday as investors sold shares in blue chips due to concerns that higher oil prices could weaken consumer demand and hurt profits, dealers said.

They said there were also concerns that the government may not fully implement a crucial expanded value-added tax (VAT) even if the tax, which has been suspended by the Supreme Court, should be finally upheld.

The composite index slipped 12.41 points to 1,993.58 after trading between 1,986.57 and 2,005.99. Volume amounted to 375.05 million shares worth P931.6 million.

The broader all-shares index retreated 5.07 points to 1,209.91.

Decliners beat risers 47 to 27, while 51 stocks ended unchanged.

The Philippine peso traded at an average of 55.809 at the end of stock market trading yesterday.

"The market continues to keep its focus on the effects of higher crude. Investors are now re-evaluating their projections on how the economy and companies are likely to perform, given the current scenario," said Jonathan Ravelas of Banco de Oro.

"An air of negativism has surrounded the market again. Some people are of the opinion that the line between politics and market fundamentals is again blurred," said Mark Alan Canizares of Citiseconline.com.

He was referring to calls that President Arroyo defer the implementation of a crucial expanded value-added tax (VAT) in order to cushion the effect of oil price increases.

The expanded VAT is needed to control the country’s budget deficit but the Supreme Court suspended its implementation on July after the opposition questioned its legality.

Philippine Long Distance Telephone Co. (PLDT) was the most active stock, closing P20 lower at P1,620. Rival Globe Telecom retreated P30 to P780.

Ayala Land gained 10 centavos to P8.30 while parent Ayala Corp ended unchanged at P315. Bank of the Philippine Islands was steady at P51.50.

San Miguel A shares, limited to Filipino investors, ended steady at P69 while San Miguel B shares, available to foreign investors, fell 50 centavos to P99.50.

Analysts said the market was also worried by newspaper reports that President Arroyo may suspend implementation of some provisions of the expanded value-added tax to cushion the impact of higher oil prices.

Leading losers were blue chips Philippine National Bank, PLDT and Ayala Corp.

PNB fell around 15 percent to P40.50 after only two of 10 prospective buyers submitted bids during Friday’s auction of a 67- percent stake in the country’s fourth-largest lender. – AFP, AP