Bourse hits 4-month low as corporate results disappoint

Reuters: Shares fell to a near four-month low on Monday, sliding further from the 6,500 point level, as disappointing June-quarter corporate results dented sentiment.

The stock market posted losses in 11 out of the last 12 sessions, while yields on short-term Government securities also fell over the past two weeks. The Colombo stock index fell 0.11%, or 6.93 points, to 6,485.76, its lowest close since 19 April. The Bourse fell 1.2% last week, its fourth straight weekly fall. “Poor corporate earnings is a concern,” said Acuity Stockbrokers CEO Prashan Fernando.

“There is also concern over corporate taxes under the proposed Inland Revenue Act and the market is awaiting for some clarity.” The Supreme Court said early this month that a major tax reform proposed by the Government cannot be passed into law in its current form, unless it is approved by more than a two-third majority vote in Parliament and gets the green-light from a nationwide referendum.

Foreign investors bought shares net worth Rs. 38.1 million (about $248,857) on Monday, extending the year-to-date net inflow to Rs. 26.8 billion. Turnover was Rs. 411.5 million, less than half this year’s daily average of around Rs. 874.2 million.

Shares of Sri Lanka Telecom Plc ended 1.9% weaker, while Ceylon Tobacco Company Plc dropped 0.5%.Asian Hotels and Properties Plc shares fell 3.3% and Dialog Axiata Plc fell 0.9%. Analysts expect equities to reverse the downtrend, helped by a fall in Government bond yields.

Short-term Treasury bond yields fell between 10 basis points (bps) and 16 bps at a weekly auction on Wednesday, while the yields on a 59-month bond dropped by 99 bps and that on a 118-month bond fell by 78 bps at the last week auction.