The expanded VAT, held up for six months by a legal challenge, finally took effect on November 1. Optimism created by its collection has also pushed the local currency to its highest level in five months.
The Philippine Stock Exchange composite index gained 46.90 points to close at the day's high of 2,007.12. It earlier hit a low of 1,960.22. It was the index's best finish since August 12, when it settled at 2,038.10.
Volume reached 1.0 billion shares worth 1.204 billion pesos (21.99 million dollars). Gainers overwhelmed losers 63 to 14, with 34 stocks unchanged. The all-shares index rose 27.75 points to 1,218.77.
As of mid-day, the Philippine peso was trading at 54.825 to the dollar after settling at 54.94 on Friday ahead of a long four-day weekend.
"Sentiment is more positive now mainly because the expanded VAT has finally been implemented," said Mark Alan Canizares of Citiseconline.com. "And since we were closed for four days, we're also catching up as far as the region's positive reaction to the strong GDP (gross domestic product) growth in the US," added Canizares. US GDP data, which came out Friday, showed a better-than-expected 3.8 percent growth in the three months to September.
Canizares said that since many investors were still out of the market and may not be back until next week for the holidays, Wednesday's gains may not represent the market's full reaction to the implementation of the new VAT law. Philippine Long Distance Telephone, the most actively trade stock, rose 30 pesos to 1,705.
Bank of the Philippine Islands advanced 4.50 pesos to 56.50 after the company said late Friday that net profit for the quarter ended September jumped 13.3 percent from a year earlier.
San Miguel A shares were steady at 65 pesos, while its B shares fell 50 centavos to 89.50 pesos.