Bourse loses Rs.113bn over capital gains tax fears in June - brokerage

The Colombo Stock Exchange (CSE) lost Rs.113 billion, or 4 percent month-onmonth in June as fears of a capital gains tax and its consequences on equity investments severely impacted investor sentiments, Bartleet Religare Securities (BRS) said. The highly liquid S&P SL20 index contracted 3.7 percent to close the month in red.

BRS said that almost all sectors recorded month-on-month losses, with services declining 10.5 percent, IT declining 9.3 percent, oil palm declining 9.2 percent and motors sector declining 7.8 percent. H o w e v e r, t h e c h e m i c a l a n d pharmaceuticals sector put in a strong performance, gaining 1.3 percent month-on-month.

“Eventhough the much awaited IMF standby loan was approved in June, the market remained sedate, as we believe the news was already priced in,” it added. There were Rs. 532.4 million in net foreign outflows due to global political uncertainties including a possible Fed rate hike and Brexit, BRS noted. A total of 484 million shares changed hands, with average daily turnover declining 36.5 percent to Rs. 503 million compared to May. BRS noted that National Development Bank PLC drove the turnover with 11 percent of the total, while John Keells Holdings PLC contributed 10 percent, Commercial Bank of Ceylon PLC with 6 percent, Chevron Lubricants Lanka PLC with 5 percent and Textured Jersey Lanka PLC with 4 percent of the turnover.

“LLUB (Chevron Lubricants) in particular saw heavy foreign selling and a price drop. We believe the Wasatch Frontier Emerging Small Countries Fund would have exited from LLUB,” BRS said. It noted that the lifting of the European Union’s fisheries ban will have a positive effect on Tess Agro PLC, since 97 percent of its revenue is derived from fisheries exports. “TESS.N and X. closed 13 percent and 15 percent higher during the week the announcement was made,” BRS said.