Climbing to the 10,000 level
It is interesting that President-elect Rodrigo Duterte only got a “moderate” 26 percent net trust rating in a recent survey conducted by social research institution Social Weather Stations (SWS) when he was the front-runner in the presidential race. In the May 1 to 3 survey, Vice President-elect Leni Robredo obtained a “good” 45 percent net rating.
Net trust ratings are arrived at by subtracting “little trust” numbers from the “much trust” figures. In the survey, 54 percent of the respondents said they have “much trust” in Duterte, 28 percent said they have “little trust” and 17 percent were undecided.
These findings seemed to explain last week’s trading results.
Share prices started strong on Monday at 7,549.80 only to lose its footing toward the end of the week. It closed lower last Friday with a small weekly loss of 4.28 points or 0.06 percent at 7,509.94.
The market appeared to reflect the same level of “trust” the survey respondents have with Duterte and his forthcoming presidency.
What could have added fuel to the market’s weak performance was the obvious decrease in the daily average value turnover to P8 billion, which was 20 percent below transaction strength to power market advance.
Positives
External developments aside like the sluggish performance of regional markets, the cost of a Brexit and the US Federal Reserve’s rate increase action, unfolding local developments seemed to have more impact on our markets.
I believe there is a good number of positive factors waiting on the sidelines to power the market.
Based on the central bank’s new index for tracking prices nationwide (the residential real estate price index or RREPI), the country is far from experiencing a property bubble “even [if] housing prices have risen by nearly a tenth annually last quarter.” The RREPI is a new tool “designed to measure the average change in prices of housing units across building types and locations to assess the country’s real estate and market conditions.”
Another is the incoming administration’s plan to reduce income tax rates, a popular scheme that could arrest restiveness and therefore redound to a stable political scenario. Incoming Finance Secretary Carlos “Sonny” Dominguez said last week the next government was considering “the reduction of income tax rates as long-term investment for prodding consumption (a proven key factor to economic growth) rather than as a revenue-eroding measure.”
Also, the next government planned to “incur a higher budget deficit equivalent to 3 percent of gross domestic product (GDP) to increase infrastructure spending, a proven key factor to faster and greater economic growth.”
Likewise, the incoming government would keep the value-added tax (VAT) rate unchanged. A scheme to recover lost revenues could instead be through “taxing fuel products based on their selling price rather than volume.”
Dominguez also planned to go after “bad guys” and prevent leakages due to corruption and/or ineptitude. In the line of fire are officials from the Bureau of Internal Revenue and the Bureau of Customs.
More than 3,000 government laws and departmental orders were also set to be repealed next month under the “Project Repeal” of the National Competitiveness Council, a newly formed body tasked to enhance the country’s economic position in the world. Under review are some 14,000 outdated laws and regulations.
Bottom line spin
Everything rises and falls depending on the leadership we have. At the moment, the burden rests on the shoulders of Duterte.
More precisely, they will test Duterte’s mettle as a national leader to deliver his promise that “change is coming.”
As far as the May 1 to 3 survey of SWS and the market’s recent trading results are concerned, some uneasiness and low expectations on his leadership continue to persist.
However, if Duterte and his team can show they can actually deliver—probably within six months as they promised—I believe the market can climb past 8,000 and even on to the 10,000 psychological level in the same period.
(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at [email protected], [email protected] or at www.kapitaltek.com)
