Philippines shares jump after VAT ruling

Philippines share prices closed 0.36 percent higher on Wednesday after the Supreme Court upheld a key tax reform measure that the government says is needed to control a chronic budget deficit, dealers said.
The Supreme Court on Tuesday ended its suspension of the expanded value-added tax (VAT) which the government of President Gloria Arroyo says is crucial to reforming the tax system, saying that no further legal challenges would be accepted.
The Philippine Stock Exchange composite index gained 6.96 points to 1,954.29 after trading between 1,942.41 and 1,955.81. Volume was 302.6 million shares worth 957 million pesos (17.17 million dollars).
The broader all-shares index advanced 4.84 points to 1,185.64.
Gainers beat losers 47 to 17 with 39 stocks unchanged.
The Philippine peso was at 55.759 to the dollar as of mid-day.
The implementation of the expanded VAT is the centerpiece of Arroyo's efforts to control the budget deficit and avoid a looming fiscal crisis but dealers noted that there have still been calls for the measure to be delayed.
Despite the court decision "there has been a strong outcry for the deferment of the VAT law," said Astro del Castillo of First Grade Holdings. "Investors are watching whether the government has the political will to push through with the VAT law or whether it will succumb to public pressure," he remarked.
International credit rating agency, Fitch Ratings, which had previously downgraded its credit outlook on the Philippines due to the failure to implement the expanded VAT, said the court decision would not trigger an immediate upgrade.
James McCormack, head of Asia sovereign ratings at Fitch, said the ratings agency would want to see the tax measure implemented in full before it starts a review of sovereign ratings.
Political concerns over the continued street protests mounted by the opposition in their four-month long campaign to unseat Arrouyo also muted the uptick.
SM Investments Corp was the most actively traded stock, rising two pesos to close at 220 pesos.
Philippine Long Distance Telephone gained 5.00 pesos to 1,665 pesos while unit Pilipino Telephone Corp advanced 10 centavos to 2.95 pesos.
Rival Globe Telecom was up 5.00 pesos at 730 pesos. San Miguel Corp A shares closed flat at 65 pesos and its B shares were steady at 92 pesos.