Stocks rally on fiscal spur
Santa came early to Colombo’s stock market with the fiscal spur by the new government stirring up retail investors who were seen punting on consumer related stocks this past week.
Analysts say that foreign investor exodus has started with Rs.2.6 billion in foreign sales upto Friday.
In line with the pledges made during the presidential election, a relief programme on the removal in the Nation Building Tax imposed on household goods and service products, Withholding Tax on interests, debit tax imposed on banks and other financial institutions along with Capital Gains Tax imposed on the Colombo Stock Exchange (CSE) were announced. The cabinet has also approved to abolish the Pay As You Earn Tax (PAYE) as well as the Debt Services Tax. Stock market investors would hail these proposals and the current market rally would carry on much longer, analysts say.
VAT on condominium properties has been abolished while VAT, a tax on domestic consumption of goods and services was reduced to 8 per cent from 15 per cent on other industries. This will increase consumer spending, an analyst said. “Consumer Sector stocks and diversified companies with exposure to consumer sector such as John Keells Holdings, Aitken Spence, Hayleys, Hemas Holdings, Softlogic Holdings, Melstar Corp, Renuka Holdings, Richard Pieris, Sunshine Holdings, Cargills (Ceylon), Ceylon Beverage Hold., Ceylon Cold Stores, Ceylon Tobacco, Renuka Foods, Convenience Foods, Distilleries, Keells Food Products, Lion Brewery, Nestle Lanka, Raigam Wayamba, Renuka Agri, Dilmah and Ceylon Tea would benefit,” he said.
Lowering the telecommunications levy to 25 per cent which will benefit Dialog Axiata, Sri Lanka Telecom. Reducing the income tax on the construction industry, from 28 per cent to 14 per cent was also announced. This will see construction firms such as Access Engineering profits increase, sector analysts say.
"We will also see a boost in consumer disposable income owing to the raise in PAYE tax threshold tied with current low lending rates which will propel growth in the construction sector," a second analyst said. (DEC)