The Philippine Stock Exchange (PSE) is drafting rules that will penalize listed companies whose public float falls below the required 10-percent threshold prior to completing a tender offer.
PSE president and chief executive Ramon Monzon said in a recent interview the proposed rules, approved by its board, aimed to protect small investors. The PSE said it would solicit comments from concerned parties.
Under the proposed rule, a company whose public float falls below 10 percent prior to the cross of the tender offer, will be required to file and pay capital gains tax (CGT) and documentary stamp tax (DST) needed to transfer the shares.
The PSE is making the amendment after the small shareholders of Holcim Philippines Inc. had to undergo the tedious process of transferring the shares, including paying CGT and DST, after the cement firm sought voluntary delisting from the local bourse.
This happened after Holcim’s majority shareholder increased its stake in the company by buying out shares owned by Sumitomo Osaka Cement Co. As a result, Holcim’s public float dropped to 5.05 percent. The PSE then suspended the trading of Holcim.
Holcim offered to conduct a tender offer to acquire the shares it did not own, but the sale of shares became subject to CGT and DST as provided under the rules of the Bureau of Internal Revenue.
Under Revenue Regulation No. 16-2012, a final tax of either 5 percent or 10 percent on the net capital gains would be imposed on every sale, barter, exchange or other disposition of shares for listed companies not compliant with the minimum public ownership requirement.
Holcim will be the third company to voluntary delist from the local bourse this year, after Eagle Cement Corp. and Metro Pacific Investments Corp.
Meanwhile, Philippine stocks are expected to trade within a narrow range this week as investors remain worried over rising inflation and interest rates.
Online brokerage firm 2TradeAsia.com said investors were anticipating another interest rate hike in the Bangko Sentral ng Pilipinas’ next policy meeting in November after September inflation rate came in at 6.1 percent.
The rising US Treasury yields are also drawing investors away from the equities market. “While it has been expected on some level, the ‘higher-for-longer’ interest rate rhetoric is creeping in and making it more difficult not to pick treasury yields, which are perceived to be risk free, over other asset classes,” 2TradeAsia.com said.
“The silver lining is the US inflation rate has decelerated the most in September. If US jobs data turn out to be more upbeat than expected, there might be some source of positive moment heading this week,” it said.
The bellwether Philippine Stock Exchange Index fell 61 points, or 0.97 percent, last week amid higher than expected inflation rate.
Average daily turnover declined to P4.7 billion while net foreign selling eased to an average of P516 million.