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By Dr Rawle Lucas
Three of the six stocks in the Lucas Stock Index (LSI) that traded this week did so at no gain. The market capitalization of the index could have suffered a loss with the decline in the stock price of Demerara Distillers Limited (DDL) which fell 0.08 percent from the previous week’s high of G$125 per share. However, bank stocks moved significantly this week and shielded the index from the decline in the stock price of the manufacturing company.
The stock price of Guyana Bank for Trade and Industry (BTI) rose one percent to reach G$725 per share while that of Demerara Bank Limited rose 10 percent to reach a share price of G$100. The market capitalisation of the nine stocks in the LSI stood at G$421 billion at the close of trading this week. The manufacturing companies whose stocks are active account for G$177.4 billion or 42 percent of the market cap while the banks whose stocks are active account for G$203 billion or 48 percent of the market value.
Tax Advantage of Stock Trades
The Guyana Stock Exchange is a slow-moving market, but it can bring significant gains for investors, especially in the area of tax benefits. The four trading periods in January 2021 is estimated to have netted investors a tax gain of nearly G$123 million. The 24 trading periods for the year is estimated to have brought stock traders an amount close to G$237 million in tax savings for the year already. The actual benefits depend on the quantity of stocks traded and the price at which the stocks were traded. It also depends on what it cost to acquire the stocks in the first instance and costs associated with the trades. However, unlike other economic activities where the tax is withheld from the gross revenues of the business, investors who trade their stocks do not have to worry about such demands as trade in stocks and the gains gotten from trades are tax free. The rationale for the tax-exemption policy is to facilitate the development of the stock market. However, after 18 years of operation, the market is still plodding along.