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The Colombo bourse opened a fresh week on a negative note as investors continued to cash in on significant gains witnessed prior to the budget.

During the week the ASPI and MILANKA reached a low of 607 and 981.4 respectively down 10.5 and 25.3 points from last weeks closing. However although the indices hit a low in the middle of the week it picked up as selling pressure eased as investors began to pick up stocks at bargain prices to close at 611.09 and 995.7 respectively.

The turnover for the week was recorded at Rs.565 million which was due to three transactions during the course of the week. The Banking and Finance Sector accounted for 41% of the weeks total turnover with the 5% shareholding of Sampath Bank believed to be an internal transaction within the Singapore based Chinkara Group of Companies contributing Rs.129.8 million. A foreign sale, believed to be by the holding company of Eagle Insurance, Zurich Financial Services Lanka Ltd to the value of Rs. 104.7 million in Eagle Insurance debentures was the other significant contribution to the week's turnover. DFCC was the buyer of the 14.5% Guaranteed Redeemable debenture at a price of Rs10 each.

The third high value transaction involved the foreign purchase of 2.1million shares of Richard Peiris worth Rs 189.9 million. Activity was witnessed throughout the week in the company that Dr. Sena Yaddehige had purchased a 27% shareholding two weeks ago. This week Richard Peiris accounted for 41% of the week's turnover with steady foreign buying although it is not yet known who the buyer is. It is believed that prominent businessman, Sohli Captain has been disposing part of his stake during the week. The share ended up 5% to close at Rs.95.

The Initial Public Offering (IPO) of 6.66 million shares of e-channeling, the first dot COM to be listed on the Colombo bourse have subscribed Rs36 million of the Rs.100 million issue as at the end of the week. In the recent investor friendly budget a 10% tax on dividends received and interest to the value of Rs.6,000 was introduced to be deducted and withheld at the time of payment.

There remains confusion as to whether the Rs.6,000 interest income is on interest received per annum or per year for which clarification has been sought. This income would be excluded from assessable income. This is a disadvantage for pensioners and low income investors whose main source income consists of earnings from interest would have to suffer the 10% tax without having the relief of a tax free allowance.

It is considered an advantage for high income earners who would earlier have been charged at the higher tax rate for their investment income would now have only a 10% deduction.

Further the abolition of the Advanced Corporation Tax companies that have continued to incur losses as per the Inland Revenue Act will benefit as such companies will now not be liable to pay ACT on dividends declared. This would have a beneficial impact on their cash flows.

The part outsourcing Rs.600 million of the Sri Lanka Insurance corporation fund management is welcome news to the bourse as the market is starved of new investors. It is hoped that the outsourcing by SLIC along with the outsourcing of part of ETF's portfolio and the 2002 budget which has outlined policies to raise Rs.21 billion through privatization proceeds would boost investor sentiment and add much needed liquidity to the market over the long term.

Further it is also very important that to reap the maximum benefits for the development of the Capital Market that the privatisation of the state owned companies should be channelled through the Colombo Bourse. Previously the controlling stake and the 20% stake as a public issue was channeled through the bourse, which resulted in increased market capitalisation and creation of a new sector as in the case of the privatisation of plantation companies and helped immensely in creating liquidity in the market. The increase of the bourse's market capitalisation is essential to obtain entry into the MSCI index. (Courtesy: HNB Stockbrokers (Pvt) Ltd)

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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