Bourse to see muted trading as market corrects

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By Krista A. M. Montealegre,
National Correspondent

AFTER STAGING a huge rally to close 2017, Philippine stocks may see subdued trading in the first week of the new year even as investors remain bullish about the market’s prospects.

Bourse to see muted trading as market corrects“There could be a technical correction within the week considering the market hit uncharted territory last Friday,” PNB Securities President Manuel Antonio G. Lisbona said in a mobile phone message.

“From what I can observe, market sentiment is still bullish.”

The local stock market finished 2017 on a strong note, rallying 1.5% last week to end the year at an all-time high of 8,558.42.

The bellwether Philippine Stock Exchange index delivered an annual gain of 25.11%, reversing a two-year losing streak, on the back of investor optimism with respect to the tax reform program that increased the take-home pay for most wage earners.

“Trading will be as light as the previous week, as investors are still returning from holidays,”  Luis A. Limlingan, business development head at Regina Capital Development Corp., said in a separate message.

The local market is coming off a two-day break as per Malacañang’s order to suspend government work and offices on the day following New Year’s Day.

“Any lull, however, would be a good opportunity to position on bargains especially those that have formed a solid base, or have retraced from their recent highs,” said in a weekly report.

In the United States, Wall Street scored its best year since 2013, with the benchmark S&P 500 rising 19.5% this year and the blue-chip Dow Jones Industrial Average up 25.2%.

A tax overhaul is seen pushing up US stocks this year because of a huge drop in the corporate tax rate that is expected to shore up the economy and corporate profits.

Like the US, the Philippine market is expected to ride the strong momentum of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, signed by President Rodrigo R. Duterte last month to finance the government’s P8-trillion infrastructure program.

The PSE hopes the strength of local equities can offset the higher stock transaction tax that takes effect this year as part of the tax reform program.

The TRAIN Law pushed the stock transaction tax to 0.60% from 0.50% — already the highest in the region — of the gross selling price to gross value in money of the shares of stock sold, bartered, exchanged, or otherwise disposed.

“At least there’s certainty on the friction cost that should not substantially decrease the volume,” PSE Chief Operating Officer Roel A. Refran said in a phone interview.

“People will buy regardless of the tax. It is a question of relative profits versus other markets,” Mr. Refran said.