Market should fall 648 Points as a result of Super Gain Tax

What would be final effect on the Market cap. I have calculated below.

Super Gain Tax =LKR 27bn
Market PER= 20 PER
Impact to Market Capitalisation:
LKR 27Bn X 20 PER
LKR 540 billion

You can also calculate the expected fall:
Current market cap =  LKR 3,000 Billion
Impact: LKR 540 Billion
% Impact = 540/3000
18%

Market should fall By 18%
Current Market ASI : 7200
Expected Fall: 1296 Points
Final ASI after adjustment : 6000

If we take a market PER of 10, then the market should fall 648 Points (ASI 6728) as a result of this tax.

(This is a theoretical calculation and therefore please do not find fault with me if it does not fall to 6000)

Market won't fall like that for one time costs.

Also these companies will change the spending on their dicsretionary costs for next year. That will more or less make very limited impact in medium term.

Also with the other initiatives, the Country will grow and in medium to long term be benefitting these Companies.

So grab the opportunity at these levels..

good claculation

Nitro 7 wrote:Market won't fall like that for one time costs.

Also these companies will change the spending on their dicsretionary costs for next year. That will more or less make very limited impact in medium term.

Also with the other initiatives, the Country will grow and in medium to long term be benefitting these Companies.

So grab the opportunity at these levels..

Don,t buy any share these levels ,market will down further...further...till end of these Buffaloes danceings....  

quibit is on the negative minded............ mood swinger :-)

Yes we need to be symphatetic towards Bi-Polar people. They say things like this expecting attention..

What a joke

anjelo wrote:quibit is on the negative minded............ mood swinger :-)

So far it has fallen only 200 points. Long way to go.

[quote="anjelo"]quibit is on the negative minded............ mood swinger :-)

At negative time ,be negative...In share market,other wise you will looser..

Quibit wrote:What would be final effect on the Market cap. I have calculated below.

Super Gain Tax =LKR 27bn
Market PER= 20 PER
Impact to Market Capitalisation:
LKR 27Bn X 20 PER
LKR 540 billion

You can also calculate the expected fall:
Current market cap =  LKR 3,000 Billion
Impact: LKR 540 Billion
% Impact = 540/3000
18%

Market should fall By 18%
Current Market ASI : 7200
Expected Fall: 1296 Points
Final ASI after adjustment : 6000

If we take a market PER of 10, then the market should fall 648 Points (ASI 6728) as a result of this tax.

(This is a theoretical calculation and therefore please do not find fault with me if it does not fall to 6000)

may your day dream come ture

sureshot wrote:

Quibit wrote:What would be final effect on the Market cap. I have calculated below.

Super Gain Tax =LKR 27bn
Market PER= 20 PER
Impact to Market Capitalisation:
LKR 27Bn X 20 PER
LKR 540 billion

You can also calculate the expected fall:
Current market cap =  LKR 3,000 Billion
Impact: LKR 540 Billion
% Impact = 540/3000
18%

Market should fall By 18%
Current Market ASI : 7200
Expected Fall: 1296 Points
Final ASI after adjustment : 6000

If we take a market PER of 10, then the market should fall 648 Points (ASI 6728) as a result of this tax.

(This is a theoretical calculation and therefore please do not find fault with me if it does not fall to 6000)

may your day dream come ture  

Next month you won,t dance..sureshot.

how say unp govement good for economy

anjelo wrote:quibit is on the negative minded............ mood swinger :-)

of cause.

Quibit wrote:What would be final effect on the Market cap. I have calculated below.

Super Gain Tax =LKR 27bn
Market PER= 20 PER
Impact to Market Capitalisation:
LKR 27Bn X 20 PER
LKR 540 billion

You can also calculate the expected fall:
Current market cap =  LKR 3,000 Billion
Impact: LKR 540 Billion
% Impact = 540/3000
18%

Market should fall By 18%
Current Market ASI : 7200
Expected Fall: 1296 Points
Final ASI after adjustment : 6000

If we take a market PER of 10, then the market should fall 648 Points (ASI 6728) as a result of this tax.

(This is a theoretical calculation and therefore please do not find fault with me if it does not fall to 6000)

send this calculation to oxford they will award u great titles like master of stock market

Market has already reacted to the news and there would many more pundits who will predict this fall. Lets read papers tomorrow.

Bad thing is big corporates will have to compensate most unproductive government servants.

You have failed to indicate the many assumptions you've made for this calculation

1) You assume the market cap or weightage assigned for each company to derive the ASPI is equal for every company and that every company will be equally affected. = This is because you have applied 18% on the ASPI instead of the ASPI's components.

2) You assume that the every company is subject to the effects of the super gains tax. = This is because you have applied 18% on the ASPI instead of the ASPI's components.

3) You assume all industry PERs average to 20 (or 10). Using an average with high statistical outliers will produce unreliable results. = This is because you use a PER of 20 (or 10) in your calculations.

4) You fail to take account of the one-time tax policy reasoning.

5) You do not factor in the ability of companies to increase their leverage in order to pay lower tax amounts (as the tax is bottom line based and not top line based).

6) You assume prices will reduce proportionately to earnings. This is because you multiply the tax amount by the PER to calculate the loss in market capitalization.

I hope you don't see this as me criticizing your formula. It's almost impossible to factor in the assumptions that you've made.

I do however believe, it is important that you MENTION these assumptions before attempting to scare the entire forum.

And with that, PLEASE INVEST ON VALUE AND NOT SPECULATIVELY.

Spoon, Thanks for detailing my assumptions, which I should have done.

I am aware it is one off tax. But since my share valuations are done on PER basis with FY 2015 Forward earning, full affect of Super Tax would be felt immediately. But I do agree it will not have the same affect in FY 2016. But 2016 has many other variable that one wouldn't forsee now.

Quibit wrote:Spoon, Thanks for detailing my assumptions, which I should have done.

I am aware it is one off tax. But since my share valuations are done on PER basis with FY 2015 Forward earning, full affect of Super Tax would be felt immediately. But I do agree it will not have the same affect in FY 2016. But 2016 has many other variable that one wouldn't forsee now.

Completely understandable. It's almost impossible to factor in the assumptions that you've made into the calculation without using probabilities that would produce several ASPI numerics and, in my opinion, erode the usability and simplicity of your prediction.

dont calculate anytine u can see the drop aftar 2 weeks

Good news possible and highly expecting they will remove the super gain tax after the today market fall.

From monday bull is ready.

if super gan tax removed how they balance the badjet

Quibit wrote:What would be final effect on the Market cap. I have calculated below.

Super Gain Tax =LKR 27bn
Market PER= 20 PER
Impact to Market Capitalisation:
LKR 27Bn X 20 PER
LKR 540 billion

You can also calculate the expected fall:
Current market cap =  LKR 3,000 Billion
Impact: LKR 540 Billion
% Impact = 540/3000
18%

Market should fall By 18%
Current Market ASI : 7200
Expected Fall: 1296 Points
Final ASI after adjustment : 6000

If we take a market PER of 10, then the market should fall 648 Points (ASI 6728) as a result of this tax.

(This is a theoretical calculation and therefore please do not find fault with me if it does not fall to 6000)

This holds true if the drop in this years earnings will be recuring in nature. Thsi is one time entry we are arguing about. market will adjust to this within few days then it will look for future trend.
What will be the future macroeconomic factors that can have an impact to the corporates. Can we expect an upward pressure on inflation with all these reductions. Jan inflation is already shows a reduction. then can the interest rates move up drastically. The government is planning to reduce expenditure on infrastructure projects so will the borrowings go high as in the past.

Looking at the new proposals and gazzets in issue I can spot 3 counters where certen uncertinies with regard to future cash flows.
JKH - due to he cancellation of casino licence and the impact on Waterfront project
DIAL - The waive off of telecommunication levy on reloads and its impact on margins
CTC - 60% pictorial impacts regulation increased to 80%

Other than these three counters rest should be ok. So the uncertainity will move the market along these counters till a clear diretion is given.

If we look at the market I feel there is a further room for market decline but it should stabilize between 6900-7000 as technical graphs show great resistance there.

If it falls from there the next level is at 6600 but it is highly unlikely to reach that deep.

Quibit wrote:What would be final effect on the Market cap. I have calculated below.

Super Gain Tax =LKR 27bn
Market PER= 20 PER
Impact to Market Capitalisation:
LKR 27Bn X 20 PER
LKR 540 billion

You can also calculate the expected fall:
Current market cap =  LKR 3,000 Billion
Impact: LKR 540 Billion
% Impact = 540/3000
18%

Market should fall By 18%
Current Market ASI : 7200
Expected Fall: 1296 Points
Final ASI after adjustment : 6000

If we take a market PER of 10, then the market should fall 648 Points (ASI 6728) as a result of this tax.

(This is a theoretical calculation and therefore please do not find fault with me if it does not fall to 6000)

Thank you for your analysis.

CSE is due for small and mid cap rally.  Investors and traders found reason to sell overvalued stocks. Market will become very attractive at the end of this sell off. Few stocks had massive rally during last 14 months. Now it is time for new stocks and sectors with favourable industrial and business environment.  It is also time to rotate stocks and sectors. There are value stocks with growth potential. Stocks with simple business are very safe.

Are people going to stop eating and drinking due to short term issues? Will tourist stay away from coming to Sri-Lanka? Will they stop exporting tea, rubber and coconut? Answer is no. Companies in above industries will have demand for their products and services for the next two decades. Consumer staples and consumer discretionary stocks are the best bet in the current market situation. There will demand for other stocks once they come down to very attractive level.

Some of the following consumer staples and discretionary stocks went up today in a heavy selling day.

ABAN,MPRH,TAFL,BFL,BBH,BLUE,ELPL,KGAL,KOTA,LLMP,ODEL,UML,WATA

UDPL, GRAN, YORK were flat.

200 done

Boom Boom cse kattiya pattha palathe wath na,
May have got posts in the Govt for all the propaganda done here at the expense of our hard earned money.