The uncertain fate of the expanded value added tax (EVAT) law, which was suspended last month by the Supreme Court, also put pressure on the market, traders said. The law is an integral part of the government’s fiscal reform program.
The benchmark 30-company Philippine Stock Exchange Index dropped 5.98 points, or 0.3 percent, to 1,979.12 after shedding 0.4 percent Wednesday. The index has lost 2.9 percent since Monday.
"The uncertainty continues on two fronts – the high oil prices and the concern on the EVAT, specifically on whether the government has the political will to implement it once the Supreme Court lifts the suspension," said Astro del Castillo, managing director at First Grade Holdings.
Globe Telecom was down 3.9 percent at P750, Filinvest Land, off 4.2 percent to P1.36 and First Philippine Holdings, lower by 1.1 percent at P44.50.
Limiting the market’s losses was bargain hunting in Philippine Long Distance Telephone Co., up 0.3 percent at P1,625, and Ayala Land, higher by 1.2 percent at P8.30.
There has been some concern in financial markets that the government may shy away from implementing the EVAT on oil and energy to ensure President Arroyo’s political survival.
The Department of Finance, however, was quick to assure that the government remains committed to implementing the EVAT law, regardless of the possibility that the new tax may lead to a sharp rise in oil and energy prices.
Mrs. Arroyo is facing an impeachment complaint in Congress for allegedly rigging last year’s elections, and her approval rating has hit record lows.
Decliners led gainers 38 to 26, while 46 stocks were unchanged.
"The market remains focused on high oil prices, which will likely hurt corporate earnings in the coming months, particularly those in the manufacturing and transport sectors," said Nestor Aguila of DA Market Securities.
Economic Planning Secretary Augusto Santos said the economy is likely to expand at a slower pace of between 5.1 and 5.2 percent this year, compared to the government target of 5.3 percent, if crude oil prices stayed between 60 and 70 dollars per barrel for the rest of the year.
In its latest emerging markets review, Merrill Lynch said it expects the Philippines central bank to further raise its policy rates before the end of 2005 – after a 25-basis point adjustment in April – to prevent inflation from overshooting the government’s target of between 5 and 6 percent. – AP, AFP