Sri Lanka may charge taxes on listed bonds issued from this month

ECONOMYNEXT - Sri Lanka is likely to exempt taxes on future interest of bonds issued before the budget in November, but is likely to tax bonds issued after, officials said.

Sri Lanka had exempted taxes on interest income on listed debentures in recent years, which will be redeemed five years or more in the future.

Deputy Treasury Secretary S R Attyalle said there was a view that future interest of the existing debentures issued before the budget should be exempt.

Finance Minister Ravi Karunanayake was also considering it, he said.

Analysts say charging tax on debentures issued earlier, where the promise of a tax-free status was given, will be similar to a retrospective tax.

The new law will come into effect from April 2017.

There is a debate whether to charge the tax from interest on debentures issued from November 2016 to March 2017.

Attygalle said the old bonds were issued and sold based on the calculation of a tax-free status and it was practically difficult to reverse it.

But bonds issued from now onwards can be done on new taxes, he said.

Colombo Stock Exchange Market Review – 15th Nov 2016

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Colombo Stock Exchange Trade Summary 15-Nov-2016

Colombo bourse remained in negative territory on the week’s opening day despite the higher foreign participation. All Share index declined by 9.43 index points or 0.15% to end at 6,406.16 while 20-scrip S&P SL 20 index lost 6.18 index points or 0.17% to close at 3,583.79.

Index losses were driven by price depreciation in John Keells Holdings (closed at LKR 147.50, -1.3%), Vallibel One (closed at LKR 20.50, -4.7%) and DFCC Bank (closed at LKR 122.90, -2.7%). However, gains recorded in Ceylon Tobacco (closed at LKR 874.90, 2.1%) and Hemas Holdings (closed at LKR 102.60, +4.5%) eased downward pressure.

Daily market turnover was LKR 470mn. John Keells Holdings was the top contributor to the turnover with LKR 184mn followed by Commercial Bank (LKR 174mn). Two Negotiated deals were recorded in Commercial Bank where 1.1mn shares changed hands at LKR 148.00. Hatton National Bank (LKR 17mn), Ceylon Grain Elevators (LKR 12mn) and Sampath Bank (LKR 12mn) were among top contributors.

Losers outweighed the gainers 92 to 33, while 68 scripts remained unchanged. High investor activity was witnessed in John Keells Holdings, Lanka IOC, Chevron Lubricants and Access Engineering. Lanka IOC advanced by 1.7% during the session to LKR 35.90 supported by positive earnings release.

Foreign investors were net sellers with a net foreign outflow of LKR 125mn, after eight consecutive sessions of inflows. Foreign participation was 61%. Net foreign outflows were seen in John Keells Holdings (LKR 180mn), Chevron Lubricants (LKR 4mn), Janashakthi Insurance (LKR 0.2mn) while net foreign inflow was mainly seen in Hatton National Bank (LKR 17mn).
Source: LSL

Sri Lankan shares hit 2-week closing low; budget proposals weigh

Reuters: Sri Lankan shares on Tuesday hit a two-week closing low in thin trade as investor sentiment was dented by last week's budget proposals that were announced to revise corporate and withholding taxes and boost revenue.

The government aims to boost its 2017 tax revenue by 27 percent to 1.82 trillion rupees ($12.36 billion) year on year, to meet a commitment given to the International Monetary Fund in return for a $1.5 billion loan in May.

The benchmark index of the Colombo Stock Exchange ended down 0.15 percent at 6,406.16, hitting its lowest close since Nov. 1.

Foreign investors were net sellers for the first time in nine sessions; they sold a net 125.4 million rupees worth of shares on Tuesday. They have net sold 1.01 billion rupees worth of shares so far this year.

"Things are very slow as investors are awaiting direction and more clarity on the taxes imposed by the budget," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"Increases in various taxes, including the withholding tax and corporate tax, have impacted the capital markets."

Analysts said the increase in various taxes and fees will reduce the disposable income of the people and challenge the consumption-led growth.

Turnover was 470.3 million rupees, less than this year's daily average of 707.3 million rupees.

Shares of conglomerate John Keels Holdings Plc fell 1.34 percent while Dialog Axiata Plc dropped 1.79 percent.

($1 = 147.3000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)