Corporate tax cuts seen as boosting bourse

By Hiran H.Senewiratne

The government's announcement of 'Trump-style' corporate tax cuts with effect from April 1, 2020 has brought  confidence to CSE investors. However,  market analysts believe that rating agencies may downgrade this tax cut because the government is likely to  fail in revenue collection for this year from this tax revision.

Under the proposed corporate tax revision,  alcohol and tobacco taxes will be slashed from 40 percent to 28 percent, finance sector tax would be reduced from 28 percent of 24 percent and the manufacturing sector is entitled to a tax cut. This drastic tax revision is likely to deprive the government of revenue amid the current financial crisis, analysts said.     

Amid those developments  stocks surged 0.46 percent yesterday, pushed up by index-heavy John Keells Holdings (JKH), provisional data showed.

The All Share Price Index (ASPI) at the Colombo Stock Exchange closed 27.44 points up at 5,941.77. Opening at a daily low, the index reached a high of 5,963.35 in the first hour of trading, before sliding downwards throughout the day. The S&P SL20 of more liquid stocks closed 0.90 percent or 21.89 points up at 2,851.60.

Market turnover touched Rs. 918.88 million with two crossings and  88 stocks gained and 40 fell during the day.

When it comes to crossings, a Rs.  53.2  million negotiated trade /crossing was witnessed in Lion Brewery at Rs. 620 a share, which crossed 85800 shares  and the stock closed flat at Rs. 624 a share. Rs.  33.6 million crossing, which crossed 200,0000 shares , was also seen in JKH at  Rs. 168  a share and the stock closed Rs. 1.40 rupees up at Rs. 167.30 a share.

In the retail market, companies that mainly contributed to the day's turnover were, Commercial Bank Rs. 353.3 million (3.8 million shares traded), JKH Rs. 78.3 million (466,700 shares traded), Sampath Bank Rs. 61.3 million (381,000 shares traded), HNB Rs. 59.5 million (370,000 shares traded) and Access Engineering Rs. 49.6 million (2.5 million shares traded). During  the day 21.1 million share volumes changed hands in 4389 transactions.

JKH, a diversified holdings firm with the highest market capitalisation in the CSE, closed Rs.  1.80  up at Rs. 167.70  a share, contributing most to the ASPI gain.

Alcohol maker Distilleries Company of Sri Lanka closed 20 cents up at  Rs. 17  a share and state telco Sri Lanka Telecom closed 70 cents up at Rs. 30.40  a share, also contributing to the ASPI gain.

Banking stocks surged 0.93 percent, continuing the momentum from Tuesday, as they would no longer be subject to the Debt Repayment Levy on financial transactions from January 31.

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