The recently enacted Capital Markets Efficiency Promotion Act (CMEPA) marks a major step toward reviving investor participation in the Philippine stock market. CMEPA also introduces broader tax alignment measures, including a standardized 20% tax on interest income and a 0.75% documentary stamp tax on foreign-issued securities.<\/p>\n\n\n\n
It significantly reduces financial transaction costs, such as the tock Transaction Tax (STT), which will be cut from 0.6% to 0.1%, lowering total trading costs by up to 50% \u2014 a key move to address declining market liquidity (US$90M daily turnover vs. US$200M a decade ago) and foreign ownership (<20%).<\/p>\n\n\n\n
Tax Alignment Measures<\/strong><\/p>\n\n\n\n – 20% flat tax on interest income<\/p>\n\n\n\n – 0.75% DST on foreign-issued securities<\/p>\n\n\n\n – 10% dividend tax on listed equities makes high-dividend names like TEL, RCR, and AREIT more attractive.<\/p>\n\n\n\n Long-Term Investing Incentives<\/strong><\/p>\n\n\n\n – Enhanced tax deductibility for Personal Equity and Retirement Accounts (PERA) employer contributions (50% additional deduction if matched)<\/p>\n\n\n\n The effectivity of the new tax and regulatory measures is on July 1, 2025.<\/p>\n\n\n\n The impact of the CMEPA reforms is further amplified by supportive monetary policy:<\/p>\n\n\n\n – BSP has already cut rates by 100bps; further easing expected with two more 25bp cuts in 2025E<\/p>\n\n\n\n – Inflation outlook benign: easing rice and energy prices support dovish policy stance<\/p>\n\n\n\n Investment Strategy<\/strong><\/p>\n\n\n\n Strong macro tailwinds and structural reforms support equities with earnings visibility and positive guidance. The market is currently trading at 11.2x Price-Earnings (PE) ratio, 9.9x forward PE. <\/p>\n\n\n\n Our index target of 7,400 is a current PE of 11.9x, one SD below 5-year mean. <\/p>\n\n\n\n Our conviction basket includes: SM, JFC, MONDE, ALI, BDO, MBT, AP, CNVRG<\/p>\n\n\n\n