Marcos Proposes Economic Reforms, Focus on Funding and Execution

From AB Capital's The Opening Bell: Three Moves Marcos proposed broader income-tax relief, MSME exemptions and amnesty, alongside Electric Power Industry Reform Act (EPIRA) changes removing system-loss charges and VAT, household solar and storage support, and the Pax Silica industrial hub. We think the package is broad, but most items still require legislation, costing, and detailed implementation rules. Meralco (MER) carries the clearest near-term single-name risk because system-loss charges, roughly 5% of a typical bill, are regulated pass-through items. Forcing utilities to absorb them could pressure margins, while refunds and installment directives tighten working capital. Rooftop solar also creates a gradual volume headwind. Fiscal policy is the main macro sensitivity. Raising the exemption threshold to P350,000, cutting brackets, removing minimum corporate income tax (MCIT) for small firms, and granting amnesty could support consumption from 2027, but no offsets or Department of Finance (DOF) costing were disclosed. Watch Development Budget Coordination Committee (DBCC) revisions, the government securities (GS) curve, and US$/Php with inflation still at 6.4%. In our view, the overall market impact is modest until execution improves. We would remain cautious on MER ahead of its July 29 results call, i.e. any guidance/update on its pending rate reset, while keeping selective exposure to gencos, renewables, industrial land, and contractors as Pax Silica develops toward its November framework signing. Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.