Sri Lanka stocks plunge 2.7-pct on 'super gain' tax shock
Jan 30, 2015 16:21 PM GMT+0530 | 0 Comment(s)
COLOMBO (EconomyNext) - Sri Lanka's benchmark stock index suffered its steepest fall in almost four years Friday, with 83 billion rupees wiped out of stock values after the new government's interim budget imposed hefty taxes on big companies.
The 196.46 point drop in the All Share Price Index was the benchmark's biggest daily fall since the 14 February 2011 plunge of 204 points.
The ASPI ended at 7,180.05 while the S&P SL20 index, which tracks the top 20 largest and most liquid stocks, slumped 172.46 points or 4.17 percent to close at 3,962.24.
Turnover was just over two billion rupees.
Dimantha Mathew, Manager Research at First Capital Equities, said prices fell after a one-off 25-percent 'super gain' tax on firms earning over two billion rupees was announced in Thursday's government budget.
"After the budget, from the start the market started to decline mainly because of the 'super gain' tax which is going to affect all large cap companies which make most of the profit," he explained.
"When they get hit, the market naturally comes down."
Recast Mathew said the top five losers - Dialog Axiata, John Keells Holdings, Commercial Bank, Ceylon Tobacco Company and Lion Brewery - accounted for 102 points in the ASPI's decline.
Friday's rout caused the Colombo Stock Exchange's market capitalisation to fall to 3,042 billion rupees from 3,125 billion rupees, wiping out 101 billion rupees of stock values.
But Mathew said the setback was temporary and that recent reductions in energy costs should help companies, especially in the manufacturing sector.
"This is a temporary set back," he said. "We're quite positive on the market especially on the manufacturing sector where there were heavy energy price cuts December and in the budget."
Correction - Correcting total share value lost to 83 billion rupees (not 101 billion) in first para and reference to Friday's market cap as 3,042 million rupees (not 3,024 million).