By Hiran H. Senewiratne
Investor sentiment remained depressed as CSE activity hit a new low yesterday on investor concerns over an impending IMF bailout, equity analysts said.
If the government follows IMF recommendations, it will likely increase the tax rate, especially corporate tax, to increase government revenue and reduce costs in some sectors. This would affect several entities in the corporate sector, market analysts added.
The Cabinet of Ministers gave the green light to Finance Minister Basil Rajapaksa to seek help from the International Monetary Fund, a government minister says, as the loosely pegged rupee suffered the worst currency crisis in its history . However, Central Bank Governor Ajith Nivard Cabraal insists on opting for a local solution, analysts said.
In addition, stock market investors are also taking a wait-and-see approach to a likely rise in interest rates, which could force people to shift to fixed-income instruments, such as fixed deposits, analysts said.
Yesterday, the index plunged sharply in the first 10 minutes of trading and then regained short-lived positive momentum followed by a relentless downward trend. Amid these developments, both indices fell. The All Share Price Index fell 280 points to end at 10284.30 and the S&P SL20 fell 104.28 points to end the day at 3512.50 pints. The turnover stood at Rs 1.66 billion with a single pass. The indices remained in negative territory as the prices of major blue-chip companies fell during the day.
The crossover was reported in HNB (non-voting), which crossed 659,000 shares at Rs 84.7 million and its shares traded at Rs 128. In the retail market, the top seven companies that have mainly contributed to turnover were; Expolanka Holdings Rs 340 million (1.3 million shares traded), Browns Investments Rs 122 million (11.4 million shares traded), Dialog Axiata Rs 121 million (10.7 million shares traded), Lanka IOC Rs 110 million (2.3 million shares traded), Access Engineering Rs 83.2 million (4.1 million shares traded), LOLC Holdings Rs 74.5 million (93,000 shares traded) and LOLC Finance Rs 64 .5 million (3.9 million shares traded). During the day, 90 million volumes of shares changed hands in 21,000 transactions.
High net worth and institutional investor participation are said to have been noted in Access Engineering, Royal Ceramics and Hayleys. Mixed interest was seen from Expolanka Holdings, LOLC Holdings and Dipped Products, while retail interest was noted from Browns Investments, non-voting SMB Leasing and Dialog Axiata.
Exterminator’s IPO was oversubscribed yesterday, which was a small IPO to raise Rs 60 million. The company will issue 10 million shares at a price per share of Rs 6 to raise Rs 60 million.
Yesterday, the US dollar was at Rs 269.99, with the free float of the rupee against the dollar initiated by the Central Bank. Until last week, the Central Bank controlled the rupee and imposed a cap of Rs 203.
