Sri Lanka stock index, turnover down to 7-week low on tax concerns

ECONOMYNEXT – Sri Lanka stock index fell to a seven-week low on Thursday (20) while the day’s turnover also slumping to the lower since the last week of August amid highly volatile market sentiments as economic uncertainties over new tax hikes dented the appetite for risky assets, brokers said.

The market saw a turnover of 1.4 billion rupees, its lowest since August 29 and lower than this year’s average turnover of 3.2 billion rupees.

The main All Share Price Index (ASPI) slipped 1.7 percent or 150.99 points to close at 8,737.38, also the lowest since August 29.

“Bourse regressed to red yet again on the back of heavy selling of retail favourites LIOC and Expo,” First Capital Market Research said in it’s daily note, referring to Sri Lanka private fuel retailer Lanka IOC and the market heavyweight Expolanka.

“Profit booking in LIOC intensified as investors expected further price reductions in fuel as the country intents to procure oil from Russia at a possibly lower price.”

Analysts also said market is going through a volatile trend as some investors are on a wait-and-see approach while others are booking profits.

Shares have been on a falling trend following the proposed tax hikes that were gazetted last week with companies expecting their profits to decline as the increased taxes are likely to reduce the disposable income of the general public, dealers said.

The appropriation bill for the 2023 budget which is expected to be a blueprint of the country’s reform package was tabled in the parliament on October 18. But investors are now waiting for the detail budget policies for 2023 which will be presented next month.

Market saw a foreign inflow of 357 million rupees with a total net foreing inflow upto date was 17 billion rupees. Foreign investors have been mainly on the buying side since the IMF signalled positive for a $2.9 billion, 4-year deal provided Sri Lanka fulfill some challenging conditions including tax hikes.

Following the tax hike proposals, stockbrokers said that the market has become bearish as investors moved to a wait-and-see approach as they expect the move to hit the fourth quarter earnings.

The most liquid index S&P SL20 closed 2.40 percent or 64.31 points lower at 2,613.06.

The index has lost 12 percent so far this Month and 28.5 percent year-to-date after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.

Lanka IOC, dragging the index, closed 7 percent lower at 200.7 rupees a share.

Expolanka fell 4.8 percent to 147 rupees a share while Richard Pieris closed 3.7 percent weaker at 26 rupees a share. (Colombo/Oct20/2022)

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