The Philippine Stock Exchange will become less competitive to foreign investors, after Congress passed a measure raising tax on stock transactions, PSE president Ramon Monzon said Thursday.
The bicameral conference committee on Wednesday night increased the stock transactions tax to 0.6 percent from 0.5 percent as a part of the government’s move to raise revenues to fund infrastructure projects.
“On the surface it might look small. But what we have to understand is that the Philippine market does not operate alone. We really compete with other exchanges for the money of foreign investors. If the stock transaction tax will increase, then the friction cost will also increase,” Monzon.
Monzon said the local bourse already has the highest friction cost in the region at 0.5 percent and this would increase to 0.6 percent.
Monzon said other exchanges have no stock transaction tax at all.
He said while the measure might not significantly affect small local investors, this would have a significant impact on foreign investors that were trading millions of dollars.
“In developing the capital markets, we have to be conscious of what other exchanges are doing in the region, and globally. Foreign investors go to a place where there is less transaction cost. So if we have transaction tax, then we will become very uncompetitive compared with other exchanges,” he said.
Monzon said to make the Philippine bourse still attractive to foreign funds, he planned to expand its financial products by launching new offerings in 2018, including the short selling and securities borrowing and lending.
“We are embarking on new initiatives to make us attractive,” Monzon said.
The exchange also aims to introduce more exchange-traded funds, lnew indices and other derivative products.
“What puzzles me in the market now is we have 12 new highs this year and we had P62 billion Energy Development Corp. tender offer and yet our average trading volume this year is just the same as 2016 level,” Monzon said.
“This means that we need to do a lot of work to increase volume and increase investor interest in our stock market,” he said.
The PSE is one of the oldest stock exchanges in Asia and started as the Manila Stock Exchange in 1927.