Stock market dips to 11-week low on retrospective tax concern

Tuesday, 29 September 2015 01:28 - - {{hitsCtrl.values.hits}}

Reuters: Shares ended near 11-week lows on Monday led by diversified and banking shares on concerns of a retrospective tax on corporates, brokers said.

The main stock index closed down 0.45% at 7,078.64, its lowest close since 15 July.

“The index fell because of the government’s move to impose a retrospective tax on corporates that had earned more than Rs. 2 billion in profit last year,” said a stockbroker on condition of anonymity.

“But the turnover is high because some investors are gradually taking positions.”

Finance Minister Ravi Karunanayake last week tabled finance bills to raise Rs. 80 billion in revenues, including from a super gain tax to be paid by corporates that earned more than Rs. 2 billion in the last financial year.

Shares of Ceylon Tobacco Company Plc fell 0.58%, while biggest listed lender Commercial Bank of Ceylon Plc dropped 0.91%.

Turnover was Rs. 1.88 billion ($ 13.34 million), the highest since 26 August and more than the daily average of Rs. 1.12 billion. The turnover has been roughly half of this year’s daily average since 31 August, stock exchange data showed.

On Monday, the central bank chief said he would not rule out a possible rate hike if credit grew faster.

Analysts said investors were waiting to see how the government would bridge the budget deficit and where the revenue would come from, in its November budget.

The IMF on 18 September said the fiscal deficit is likely to range between 5.5% and 6% in 2015, much higher than an official target of 4.4%, due to falling Government revenues.

Foreign investors were net sellers of Rs. 630 million worth of shares on Monday, extending the year-to-date net foreign outflow to Rs. 3.12 billion.