By Revin Mikhael D. Ochave, Reporter
REPUBLIC ACT No. 12214, or the Capital Markets Efficiency Promotion Act (CMEPA), is expected to enhance the Philippine stock market by reducing transaction costs, boosting trading activity, and increasing liquidity, analysts said.
CMEPA strengthens the Personal Equity and Retirement Accounts (PERA) program, which will help further develop the capital market, DragonFi Chief Executive Officer Jon Carlo C. Lim said in a Viber message over the weekend.
“This will not only help address the pension gap but also enhance the attractiveness of investible assets within the PERA framework — further deepening our capital markets,” Mr. Lim said.
“This is a commendable piece of legislation that will advance the development of our capital markets,” he added.
President Ferdinand R. Marcos, Jr. signed CMEPA into law on May 29.
Under the law, private employers who contribute an amount equal to or greater than their employees’ contributions to PERA are entitled to an additional 50% tax deduction on their actual contributions.
PERA is a voluntary retirement savings program that supplements employer-sponsored retirement plans and government-based pension plans.
China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message that the new law will help entice more investors following the reduction of the stock transaction tax to 0.1% from 0.6%.
“The significant reduction in the stock transaction tax from 0.6% to 0.1% will help improve investor returns, increase trading frequency and value turnover, and lead to tighter bid-ask spreads,” he said.
CMEPA also lowers the documentary stamp tax (DST) on the original issue of shares of stock to 0.75% from 1%, and imposes a uniform 0.75% DST on bonds, debentures, and certificates of stock or indebtedness issued in foreign countries.
“The passage of CMEPA sends a clear message to both domestic and global investors that the Philippines is committed to building deeper, more efficient capital markets,” Special Assistant to the President for Investment and Economic Affairs Frederick D. Go said in a statement.
“This reform is expected to boost and strengthen liquidity, trading activity, capital formation, and contribute to broader economic growth,” he added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the new law supports the country’s efforts to attract large-scale foreign fund managers.
“The law helps us to better compete with other ASEAN and Asian markets in terms of reduced transaction costs,” he said in a Viber message.
However, Mr. Colet said there is still a need to create conditions that will allow for more listed companies and attract more stock investors.
He said there should be well-calibrated privileges for listed companies, such as lower taxes on issuers who meet certain public float, daily trading, and value metrics.
“Government financial institutions can also sponsor and anchor a public-private initial public offering fund that can be deployed to support the listing of qualified companies,” he said.
Mr. Colet also suggested providing incentives for stock investing, such as amending Republic Act No. 9505, or the PERA Act, to increase the annual contribution limit and income tax credit for investments in listed stocks.
“It is also imperative to strengthen corporate governance and minority shareholder safeguards so that institutional and retail investors are reasonably protected,” he said.
“The government is moving in the right direction when it comes to market-friendly reforms, and we hope they sustain this by introducing more initiatives to broaden and deepen our public equities market,” he added.
On Friday, the benchmark Philippine Stock Exchange Index dropped 1.11%, or 71.28 points, to 6,341.53, while the broader all shares index retreated 0.78%, or 29.48 points, to 3,723.62.
