- S&P SL20 drops by over 5% yesterday
- First Capital’s Dimantha Mathew attributes halt to 21A uncertainty, tax hikes
- Anticipates June quarter to be ‘bad’ for the market
By Imesh Ranasinghe
The Colombo Stock Exchange (CSE) halted trading in the last thirty minutes of the two-hour trading period yesterday (6), marking the first trading halt since Prime Minister Ranil Wickremesinghe assumed office.
The last trading halt was on 26 April, while Wickremesinghe was appointed as the Prime Minister of Sri Lanka on 12 May, after which the market, which had seen somewhat negative performance over a few weeks, witnessed a 4% growth on 13 May.
Yesterday’s trading halt occurred due to the S&P SL20 index dropping over 5% from its previous close, driven by uncertainties over the 21st Amendment, and selling pressure triggered by tax hikes.
Speaking to The Morning Business, First Capital Head of Research for Investments Fixed Income and Equity Dimantha Mathew said that the market has been continuously falling in the second half of trading from last week due to political uncertainty – with the 21st Amendment to the Constitution coming to no conclusion as of yet – as well as the tax hikes expected in the next few weeks.
Further, he said that the June quarter results will turn out poorly “because of this lower consumer demand that is happening and the inability to produce”.
The S&P SL20 index fell by 108 points from its previous close to 2,539 by the end of the day and the All-Share Price Index (ASPI) fell by 251 points to 7,803. Both values were the lowest figures in the month of June so far. The day’s turnover stood at Rs. 1.4 billion, up from Rs. 1.3 billion on 3 June, with 73 million shares traded yesterday.
Ceylon Tobacco Company PLC (CTC) was the top contributor to the ASPI with a 4.5-point gain in the index while LOLC, Expolanka, and Browns Investments PLC lost points in the index (-37.7, -35.5, and -21.9, respectively).
Mathew said that the downward trend of the market will continue until there is some sort of stability in the country.
“At least if we can pass the 21st Amendment, then on the political side, we will see some sort of direction,” he said.
Moreover, he said, investors do not have any policy direction regarding where the country is going, or whether the International Monetary Fund’s (IMF) assistance is coming in the future.
“As long as uncertainty is there in an economy and on the political front, we will continue to have the market sliding down. We saw this trend continuing in the 2017-2019 period significantly,” he added.
Therefore, he noted that the market volatility will continue, with a higher level of selling pressure among investors.