“Biz-hostile” Budget wipes off Rs. 168 b in stock market value

Thursday, 5 February 2015 00:46 - - {{hitsCtrl.values.hits}}

The President Maithripala Sirisena-Premier Ranil Wickremesinghe Government’s Interim Budget has wiped off a staggering Rs. 168 billion in stock market value owing to it being widely-feared as hostile for businesses. Prior to the Interim Budget presentation on 28 January, market capitalisation was Rs. 3,133 billion but by Monday, it had sunk below the Rs. 3 trillion mark to finish at Rs. 2,965 billion. It is over 4% down year-to-date whilst the All Share Index too is down by a similar percentage and the S&P SL 20 Index is lower by 6%. During the two post-Budget trading sessions, the main index slipped by 5.1% (376 index points) while the S&P SL20 index declined by 7.5% (310 points). During Monday’s trading session, the ASI declined to the 7,000 mark after five months, shedding 179.99 index points or 2.5% to close at 7,000.06, while the 20-script S&P SL index decreased by 137.26 index points (-3.7%) to end at 3,824.98. Soon after the 8 January presidential poll victory by Maithripala Sirisena, investor sentiment was bullish but continuous and the sharp dip since the Interim Budget has caused serious concern as capital market fortunes impact over 500,000 families. Last year the CSE emerged among the top six best performing world markets with a gain of 23%. The loss of value at the CSE is largely owing to widespread concerns over the Interim Budget presented by Finance Minister Ravi Karunanayake including what some described as an “amateurish” yet draconian super gain tax. Most brokers linked the dip to taxation issues in the Interim Budget. “Colombo Equities slumped again on Monday, mirroring a similarly sharp selloff seen in the previous session as the impact of the proposed ‘super gain tax’ rippled through the market for the second consecutive day,” Lanka Securities said. “The market tumbled further owing to continuous panic selling as investors feared the negative impact of the super gains tax on corporate earnings, whilst factors such the Government’s revaluation of the feasibility of infrastructure projects continued to hamper positive sentiments,” Asia Securities said. “Panic selling by insecure investors over the new tax burdens by the Budget proposals on corporates was observed, which resulted in the market remaining sluggish,” added SC Securities, whilst LOLC Securities said: “Negative sentiment in the market continued and recorded a further drop as investors continued to be bearish about the market.” Premier blue chip John Keells Holdings has been the biggest loser in the market. It declined sharply for the third day in a row and all three counters of the company touched a 52-week low price level. The super gain tax and the ban on gaming facility/casino in the Waterfront project led to the decline in JKH, according to Lanka Securities. JKH touched Rs. 200 and closed at Rs. 200.10 (-6.4%). Adding to the market’s woes, foreign investors were net sellers after three consecutive days of net buying.

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