Share market to perform sideways in short term
The Colombo share market will perform sideways for the next few months on the back of Sri Lanka trying to go to the International Monetary Fund (IMF) which will see corporate bottom lines getting hit and subsidies being slashed.
In a high inflationary environment, real assets such as real estate and stocks will perform well.
But Sri Lankan investors aren’t very savvy on financial instruments and they may not flock to the market at once, they said.
With the big economic issue the country is facing, the stock market will not perform well is what economists say. Stockbrokers and stock analysts confirm this saying that it will perform sideways within the next six months. The main All Share Index is slated to oscillate between 10,000 to 12,000 points. Analysts say that if the interest rates increase further the main index will break 10,000 points and with an IMF programme it will break 12,000 points. But it will not go beyond.
An economist said that with the impending changes the profitability and balance sheets of listed companies will be impacted negatively. “Certain companies in sectors like finance and banking, trading etc will have a very tough time.”
A stockbroker said that the March 31st ending quarter will be good for listed firms but their future earnings are a question mark. “The 25 per cent super gains tax will increase the total tax component of companies by 65 per cent which is a big burden,” he said pointing out that earnings and profitability will see a drastic decline in the coming quarters.
A second stockbroker confirmed this noting that banks will be heavily impacted by the value added tax bill. A stock market analyst stressed that at least 8 to 15 listed companies are slated to go bust owing to the exchange rate and the dollar crisis in the country.
A second economist said that the IMF programme will ensure cutting subsidies impacting purchasing power of the middle class which in turn will see negative growth in corporates especially those dealing in consumer goods and services.
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