CSE plunges by 2.5 per cent in the wake of budget proposals

By Hiran H.Senewiratne

The CSE fell 2.5 percent at the beginning of trading yesterday subsequent to Finance Minister Basil Rajapaksa’s 2022 budget presentation due to the 25 percent retrospective tax surcharge on firms that earned over Rs. 2 billion in 2020/21 and the 3 percent increase in Value Added Tax (VAT) for banks, insurance, and financing firms.

VAT was increased to 18 percent from the current 15 percent on banks and financial service providers under supply of financial services by specified institutions with effect from Jan.1, 2022, targeting Rs 14 billion from the proposal.

CSE fall was led by banks and financial sector institutions. This was expected and banks were worried about the tax because it would adversely impact the banking and financial sector institutions, market analysts said.

However, during the latter part of the day the CSE showed some recovery. It was the same in 2015 when the last government came up with a similar retrospective tax that was introduced, stock market analysts said.

The All- Share Price Index plunged to 10,372 immediately after it opened and dropped to over 2 percent but later recovered slightly due to the LOLC group witnessing some buying pressure from two main companies, LOLC Holdings and LOLC Finance, that drove the market, stock market analysts said.

Accordingly, both indices showed mixed reactions. The All -Share Price Index went up by 86.28 points and S and P SL20 went down by 17.57 points. Turnover stood at Rs 6.9 billion with two crossings. Those crossings were reported in Chevron Lubricants, where 340,000 shares crossed for Rs 35.7 million and its shares traded at Rs 105 and LOLC Holdings 29000 shares crossed for Rs 20.1 million, its shares traded at Rs 696.

In the retail market top five companies that mainly contributed to the turnover were, LOLC Finance Rs 2.1 billion (74.6 million shares traded), Expolanka Holdings Rs 428 million (2.1 million shares traded), Browns Investments Rs 423 million (36.6 million shares traded), RIL Properties Rs 364 million (23.8 million shares traded) and LOLC Holdings Rs 339 million (480,000 shares traded). During the day two LOLC Group companies share prices appreciated. Those were LOLC Holdings, whose share price appreciated by Rs 29.25 or four percent. Its share price shot up to Rs 738 from Rs 692.75, contributing 31 points to the All- Share Price Index. LOLC Finance share price appreciated by Rs 12.90 or 15 percent. Its share price shot up to Rs 95.50 from Rs 82.60. Other than the LOLC Group of companies, significant price appreciation was witnessed in Watawala Plantations, whose share price appreciated by 15 percent or Rs 12.90. Its share price appreciated to Rs 95.250 from Rs 82.60.During the day 316 million share volumes changed hands in 52000 share transactions.

MSCI Inc., the leading provider of research-based indexes and analytics, has included Expolanka Holdings PLC in its Frontier Markets Equity Index.

Expolanka is one of the three largest additions to the MSCI Frontier Markets Index measured by full company market capitalization. The other two are Phat Dat Real Estate (Vietnam) and Islandsbanki (Iceland).

MSCI also announced four deletions from the Index, including Commercial Bank of Ceylon PLC. The MSCI Sri Lanka Index has two constituents. JKH is the other, apart from Expolanka. The MSCI Sri Lanka had offered 7.55 per cent return as opposed to 8.57 percent by MSCI Frontier Markets index since 31 May 2002. MSCI Sri Lanka’s PE ratio is 10.78 times as against 16.59 times of MSCI Frontier Index.

Yesterday, the US dollar was quoted at Rs 202.05 as per the Central Bank controlled price. This was introduced to control price increases of essential items in the local market.