Sri Lanka stocks edge down on tax hike worries after PM appointed as new finmin

ECONOMYNEXT – Sri Lanka stock market closed weaker on Wednesday (25) as the market feared over tax hikes in the near future after Prime Minister Ranil Wickremesinghe was appointed as the the new finance minister, dealers said.

“The market did pick up on the new finance minister’s appointment, hype but it quickly fell down on worries that there will be a fiscal consolidation to face,” a top market analyst said.

“The overall market is gearing towards the downward trend due to this fiscal consolidation as the new budgets will be tax-based.”

Wickremesinghe was appointed as the new finance minister on Wednesday (25).  He has promised to present a new budget soon and said the budget deficit for this year could be as high as 13 percent of the GDP, which is highest since 1982.

The All Share Price Index (ASPI) closed 0.28 percent or 23.31 points down at 8,370.16.

In the previous session, the market was brought down by the fuel price hike which analysts saw as a deterrent to the economic growth.

Added to this was the central bank governor’s comment on the country’s growth contracting to record levels due to the economic crisis.

The most liquid index S&P SL20 fell 1.41 percent or 39.75 points to 2,776.70.

The day’s turnover was 1.65 billion rupees, less than a half this year’s average daily turnover of 4.0 billion rupees.

Sri Lanka’s sovereign default has already led it to restricted/selective default rating by rating agencies. The 84.5 billion economy has already suspended foreign debt payments as it had run out of dollars.

Investors are also concerned over the steep fall in the rupee, which has fallen over 80 percent since it was allowed flexibility on March 7.

The market has gained 9.7 percent in May so far following a loss of 23 percent in April and 14.5 percent in March.

The market has lost 31.5 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year.

Foreign investors bought a net 11.6 million rupees worth of shares. The market has witnessed a total foreign outflow of 1.2 billion rupees so far this year.