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Shares fall on worries over tax proposals

Shares fall on worries over tax proposals

REUTERS: Shares ended slightly weaker on Friday in light trade and posted their ninth session of decline in 10 as worries over new tax proposals weighed on sentiment.

However, foreign investors bought beaten-down stocks, limiting the downside. Foreign buying accounted for about half of the day’s turnover of Rs. 209.5 million ($ 1.31 million) which was well below this year’s daily average of Rs. 822 million.

Foreign investors purchased a net Rs. 32.3 million of shares, making them net buyers for a second straight session after five consecutive sessions of sales. They have sold a net Rs. 3.4 billion worth of shares so far this year. The Colombo stock index fell 0.05% to 6,052.69, hovering near its lowest close since 30 March 2017 hit on Tuesday. It closed marginally higher for the week after four straight weekly falls.

“We expected the uptrend to be short-lived and today, there was not much of turnover due to less foreign and local participation,” said First Capital Holdings Head of Research Dimantha Mathew.

“Lower local participation is continuing due to the tax worries and hurting investor sentiment.”

Banking and telecom stocks have been under pressure recently after a local media reported last week that the Government planned to impose new levies on these sectors to boost revenue, analysts said.

Lacklustre corporate results and a Moody’s report saying Sri Lanka could face significantly tighter external refinancing conditions in the next five years have also dented investor appetite for riskier assets, analysts said.

Shares in Dialog Axiata PLC fell 1.7%, market heavyweight John Keells Holdings lost 0.5% and Lanka ORIX Leasing Co. PLC declined 3.2%.

The Central Bank left its key policy rates unchanged on 3 August, as expected, citing its goals of stabilising inflation and fostering sustainable economic growth.

Central Bank Governor Indrajit Coomaraswamy said the economy was unlikely to grow more than 4% in 2018, falling short of an earlier estimate of 5%.

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