Shares, rupee gain after tax cuts; policy rates awaited

Friday, 29 November 2019 00:25 - - {{hitsCtrl.values.hits}}

Reuters (Colombo): Shares and the rupee ended higher on Thursday, a day after the Government said it has decided to reduce value-added tax to 8% from 15% with effect from 1 December, along with plans to abolish some other taxes as well.

The gains also came a day ahead of the Central Bank’s key monetary policy rate decision, which is likely to be left steady at a policy review out today, a Reuters poll indicated.

The benchmark stock index jumped 1.34% to 6,201.12, its highest since 25 June 2018. The bourse gained 1.6% last week, and is up 1.10% for the year.

Analysts said positive sentiment surrounding tax cuts by the country’s newly-elected President helped.

“The market expects a booming consumer demand due to the tax cut,” said Dimantha Mathew, head of research at brokerage First Capital Holdings.

The rupee ended 0.11% firmer at 180.60/80 per dollar, compared to Wednesday’s close of 181.80/181.10, Refinitiv data showed. It is up 0.5% so far this year.

Foreign investors were net sellers for 23 sessions out of 25.

They sold a net Rs. 821.2 million ($4.56 million) worth of shares on Thursday, extending the net selling so far this year to Rs. 10.3 billion worth of equities, according to index data.

Equity market turnover was Rs. 2.78 billion, more than this year’s daily average of about Rs. 721 million. Last year’s daily average was Rs. 834 million.

Foreign investors were net buyers of government securities on a net basis for the fifth straight week, purchasing a net Rs. 0.21 million worth of government securities in the week ended 20 November.

Total foreign outflows from government securities through 20 November stood at Rs. 48 billion, according to Central Bank data.

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