Local investors in CSE bearish over President’s announcement on tax proposals

The Colombo stock market reversed its gains yesterday after President Ranil Wickremesinghe’s tax announcement in Parliament. However, foreign investors stepped up buying thereby boosting year to date net inflow to over Rs. 4 billion.

The benchmark ASPI dipped by nearly 1.1% and the active S&P SL20 declined by 1.5%. Turnover was Rs. 2.2 billion involving 62.9 million shares.

Net foreign buying crossed Rs. 84 million boosting the year-to-date figure to Rs. 4.1 billion.

Foreigners recorded a net inflow of Rs. 39.9 million while their participation increased to 2.8% of turnover (previous day 2.4%). Net foreign buying topped in MGT.N at Rs. 28.5 million ($ 88k), while net foreign selling topped in HHL.N at Rs. 9 million ($ 28k).

Asia Securities Research said following three sessions of upward momentum, the market closed down yesterday mainly due to selling pressure in primary dealers due to the President’s announcement of a proposed tax on them in the upcoming Budget.

Diversified financials, banks, food, beverage and tobacco and capital goods sectors led activity, collectively accounting for 78.6% of turnover.

Asia Securities Research added that CALT (-9.3%), FCT (-10.9%), and CFVF (-9.6%) closed with sharp losses while banking counters HNBN (-1.7%), COMBN (-2.9%), SAMP (-1.6%), NTBN (-2.2%), and PABC (-2.2%) added further pressure on the indices during the session. On the other hand, Asia Securities said DIST (+1.2%), GLAS (+3.4%), AHPL (+1.3%), and VFIN (+2.3%) closed higher for the day.

Turnover remained at Rs. 2 billion levels with CALT (Rs. 586 million), FCT (Rs. 204 million), and HNBN (Rs. 199 million) leading the way. COMBN (-21 points), SAMP (-11 points), and HNBN (-9 points) came in as the biggest laggards on the ASPI for the day.

First Capital said the market showcased a downward trend yesterday as selling pressure emerged on banking and diversified financial sector counters which resulted in the index to halt in the red zone at 11,354 losing 121 points.

It also added that the tourism sector continued to back the index on a positive tone resulting from the hike on tourists’ arrivals passing the 100,000 figure for the third consecutive month as arrivals for August 2023 recorded 136,405 adding a favourable spark on hotel sector shares.

Furthermore, the resurgence in retail sector participation continued its positive momentum as small and mid-cap shares witnessed active investor participation. First capital added Treasury counters experienced a spree of panic selling followed by the announcement to include a capital gains tax on Treasury counters which is to be included in the Budget for 2024 along with surprises which are yet to be disclosed.

Meanwhile the turnover was recorded at Rs. 2.3 billion, 24.5% lower than the monthly average of Rs. 3 billion, aided by the banking sector and diversified financials sector accounting for a joint contribution of 63%.

NDB Research said indices closed in red as a result of price losses in counters such as Commercial Bank, Sampath Bank and Hatton National Bank with the turnover crossing Rs. 2.2 billion. High net worth and institutional investor participation was noted in Seylan Bank nonvoting and Hatton National Bank.

Mixed interest was observed in Capital Alliance, First Capital Holdings and First Capital Treasuries whilst retail interest was noted in SMB Leasing nonvoting, Browns Investments and Agarapatana Plantations.

Foreign participation in the market activity remained at subdued levels with foreigners closing as net buyers.

Diversified financials sector was the top contributor to the market turnover (due to Capital Alliance, First Capital Treasuries and First Capital Holdings) whilst the sector index lost 1.95%. The share price of Capital Alliance decreased by Rs. 8.40 (9.25%) to close at Rs. 82.40.

The share price of First Capital Treasuries lost Rs. 4.90 (10.91%) to close at Rs. 40.00. The share price of First Capital Holdings recorded a loss of Rs. 5.50 (9.65%) to close at Rs. 51.50.

The banking sector was the second highest contributor to the market turnover (due to Hatton National Bank) whilst the sector index decreased by 2.25%. The share price of Hatton National Bank moved down by Rs. 3.00 (1.67%) to close at Rs. 177.00.

Hayleys Fabric was also included amongst the top turnover contributors. The share price of Hayleys Fabric appreciated by Rs. 0.30 (0.63%) to close at Rs. 48.20.