SHARE prices rallied yesterday as investors flooded back to the market in an upbeat mood after parliament reached consensus on taxing their profits at a lower rate than expected, pushing the all-share index up by more than five per cent.
Recovering from heavy losses earlier this week, the index jumped 5.25 percent, or 36.11 points, to 724.55 in a broad-based rebound led by commercial shares.
The market opened clear of 700 points, a psychologically-important threshold pierced by a wave of profit-taking on Monday. The all-share index traded in a band of 717.34 to 734.67, the intraday high and lows.
Turnover was significantly higher at £32.04 million and 5,432 trades, compared to £23.2 million and 3,548 deals in Tuesday’s session, which was interrupted by a bomb hoax.
Mid-cap commercial shares led the rally followed by industrial and tourism shares. Blue-chip banking stocks climbed 4.3 per cent.
A rally on prices was widely expected after parliament on Tuesday approved lower than expected taxes on bourse gains.
“Investors now know where they stand. There was a great deal of confusion on what the government sought and this had an impact. Uncertainty is bad for the market,” one stockbroker said.
Investors fearing high tax bills had stayed clear of the market in recent days, caught unawares by government pronouncements that this year’s bourse gains would be subject to tax after they had been led to believe their gains would be tax free.
“They based that assumption on promises they had heard from ministers,” one broker said.
Seeking to boost coffers and plug holes in a gaping fiscal deficit, the finance ministry bill tabled to parliament wanted the five per cent tax slapped on investors for 1999 to remain in force indefinitely.
But in a rare show of unanimity, parliament tossed out the government bill, imposing their own, which instead makes the five per cent a one-off for 1999 and applicable only on profits of over £35,000.
That tax will be replaced with lower levies for 2000 and 2001.
The five per cent tax is applicable for individuals, whereas corporate tax rates of 20 and 25 per cent – depending on the income bracket – will apply for companies.
Brokers said the 1999 arrangement was clearly tilted in favour of small investors rather than corporations.
“That, however, will be cleared up with the new levy which comes into force next year,” said Stavros Agrotis of CISCO.
Next year, individuals will pay 0.6 per cent on all market transactions, while corporations will pay 1.0 per cent.
Newcomer Unifast Finance and Investments yesterday opened at £3.15 and closed at £3.55 on a volume of 40,820 shares; retail chain Mallouppas and Papacostas and interior designers Ceilfloor will debut today.
The bourse also announced that computer vendors Logicom will float their shares on the market on January 4.
