Perceived Tax Amnesty Act benefits bring bounce to bourse

By Hiran H.Senewiratne

The CSE bounced back yesterday after witnessing a heavy market drop on the previous day due to panic-stricken investors disposing of their stocks to gain short term profits after the Central Bank’s involvement in controlling the rupee rate as against the dollar, stock market analysts said.

One of the reasons for the stock market to bounce back yesterday was a comment by State Minister of Finance, Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal to the media that the recently passed Tax Amnesty Act would benefit the capital market and that there could be an inflow of around Rs. 100 billion to the CSE before the end of the year. This gave a slight impetus to the highly volatile stock market, analysts said.

Further, the Central Bank also issued new directions to licensed commercial banks and the National Savings Bank on the import of certain non-essential and non-urgent goods with immediate effect until further notice to preserve foreign reserves. This slightly impacted export- oriented companies yesterday, analysts said.

Consequently, both indices moved upwards. The All Share Price Index went up by 222 points and S and P SL20 rose by 66.80 points. Turnover stood at Rs. 5.7 billion with four crossings. Those crossings were reported in Sampath Bank, where four million shares crossed to the tune of Rs. 204.8 million, its shares traded at Rs. 51.50, Expolanka Holdings 600,000 shares crossed for Rs. 105.6 million, its shares traded at Rs. 176, HNB 250,000 shares crossed for Rs. 35.7 million, its shares fetched Rs. 143 and HNB (Non Voting) 200,000 shares crossed for Rs 26 million, its shares trading at Rs. 130.

In the retail market, five companies that mainly contributed to the turnover were, Expolanka Holdings Rs. 1.59 billion (9.2 million shares traded), Browns Investments Rs. 1.26 billion (129 million shares traded), LOLC Holdings Rs. 400 million (725,000 shares traded), Nestle Lanka Rs. 379 million (314,000 shares traded) and Hayleys Rs. 221 million (two million shares traded). During the day 265 million share volumes changed hands in 36000 transactions.

It is said that clients are using the current market weakness to accumulate fundamentally strong stocks. This is because it is believed that there are no structural reasons, whether on a macroeconomic level or at a company level, to justify the current sell off. It was important to note that major shareholders continued to hold their stakes, or even increased their stakes, reflecting strong confidence in the stocks they had invested in, market analysts said.