Tax surcharge issue dampens bourse as investors turn cautious

By Hiran H.Senewiratne

The CSE has seen over Rs. 100 billion in value wiped off in two days as investor sentiment turned cautious amid macro issues as well as prospects of companies but the turnover level was satisfactory yesterday.

At the beginning of trading buying interest was noted on most of counters but suddenly the momentum dipped because of the 25 per cent surcharge tax on taxable income of companies that earn more than Rs two billion per annum. This created some gloom in the mind set of investors, stock market analysts said.

LOLC Group shares did not perform well yesterday despite LOLC Holdings being authorized to buy 73.2 per cent of Key Microfinance Bank PLC of Kenya.

LOLC is buying the Kenyan firm through a subsidiary in Mauritius, which is a financial centre. Mauritius had the first currency board in Asia set up by the British authorities in 1849. Ceylon’s currency board was set up in 1885, market analysts said.

Amid those developments both indices moved downwards. The All -Share Price Index went down by 300 points and S and P SL20 declined by 92.8 points. Turnover stood at Rs 5.3 billion with two crossings. Those crossings were reported in TJ Lanka, which crossed 500,000 shares to the tune of Rs 23.3 million and its shares traded at Rs 46.50 and Softlogic Holdings 300,000 shares crossed to the tune of Rs 21.9 million, its shares traded at Rs 73.

In the retail market top seven companies that mainly contributed to the turnover were; Expolanka Rs 685 million (2.2 million shares traded), Softlogic Life Insurance Rs 539 million (3.2 million shares traded), Browns Investments Rs 371 million (26.1 million shares traded), Softlogic Capital Rs 255 million (14.3 million shares traded), LOLC Finance Rs 255 million (9.9 million shares traded), Commercial Leasing and Finance Rs 226 million (5.5 million shares traded) and Softlogic Holdings Rs 201 million (2.7 million shares traded). During the day 207 million share volumes changed hands in 52000 transactions.

During the latter part of the session the index gradually recouped but failed to hold a positive momentum before closing for the day at 12,382 losing. Turnover was led by a joint contribution of 44 per cent from the Diversified Financials sector and Capital Goods sector.

It is said that high net worth and institutional investor participation was noted in Teejay Lanka, Lanka Orix Finance and Vallibel One. Mixed interest was observed in Expolanka Holdings, Softlogic Life Insurance and Hela Apparel Holdings Limited, while retail interest was noted in Industrial Asphalts, Browns Investments and Commercial Leasing & Finance.

The Capital Goods sector was the second highest contributor to the market turnover while the sector index decreased by 2.26 per cent. Expolanka Holdings, Browns Investments and Softlogic Life Insurance were also included among the top turnover contributors.

Yesterday the US dollar was quoted at Rs 202.06, which was the controlled price of the Central Bank. The Central Bank has imposed a controlled price of Rs 203 per US dollar. The actual price would be around Rs 250, financial sources said.