Bourse in bearish mode as panic gathers over 25 per cent tax surcharge

By Hiran H.Senewiratne

The CSE began the fresh week on a negative note with both indices down 1 per cent as investor sentiment remained bearish yesterday. Stock market investors panicked due to the new 25 per cent surcharge tax on taxable income for companies that earned more than rupees two billion per year, stock market analysts said.

Sri Lanka will charge a 25 per cent windfall tax in the style of a ‘super gains tax’, started by the last administration on groups of companies, companies, partnerships and individuals earning over Rs 2.0 billion, according to a draft law that has been gazetted.

Group of companies will be charged from the stated year of assessment even if a subsidiary earned less than Rs. 2.0 billion. The tax proposed in the budget for 2022 will apply retrospectively from the year of assessment starting April 2020. The tax has to be paid in two tranches in March and June 2022, which news caused panic and discouraged stock market investors in a big way, market analysts said.

Amid those developments both indices showed a downward trend. The All- Share Price Index went down by 228 points and S and P SL20 declined by 102 points. Turnover stood at Rs 5.3 billion with two crossings. Those crossings were reported in TJLanka, which crossed 735,000 shares to the tune of Rs 34.9 million and its shares traded at Rs 47.50 and LOLC Finance 725,000 shares crossed for Rs 20.3 million; its shares traded at Rs 28.

In the retail market the top seven companies that mainly contributed to the turnover were, Expolanka Holdings Rs 865 million (2.7 million shares traded), Commercial Leasing and Finance Rs 639 million (15 million shares traded), Browns Investments Rs 282 million (19.2 million shares traded), Softlogic Life Insurance Rs 280 million (1.9 million shares traded), Hela Apparel Rs 261 million (15 million shares traded), LOLC Finance Rs 241 million (8.6 million shares traded) and Vallibel One Rs `207 million (2.5 million shares traded). During the day 188 million share volumes changed hands in 56000 transactions.

It is said the bourse skidded to the red zone as ambiguous investors resorted to booking profits in selected counters over rising uncertainties in the economy while recording a turnover at a near two-week low.

“Shortly into the market opening, index started to decline sharply and continued to move on a downward trajectory for the rest of the session over an intensified selling spree mainly in retail favourite counters, such as, Expolanka and LOLC, which largely stirred the ASPI drop with the market closing for the day at 12,632, financial sources said.

It is said high net worth and institutional investor participation was noted in JKH, LOLC Finance and Lanka IOC. Mixed interest was observed in Expolanka Holdings, Softlogic Holdings and Sunshine Holdings while retail interest was noted in Hela Apparel Holdings, Commercial Leasing and Finance and Browns Investments.

Yesterday, the US dollar rate was quoted at Rs 203.02, which was the controlled price of the Central Bank. If the Central Bank allows a free float of the currency it would go up to more than 250, analysts said.