Shares fall for 4th straight session; VAT proposal weighs

Reuters: Sri Lankan shares fell for a fourth straight session on Tuesday, led by large caps, as selling pressure on stocks expected to take a hit from a proposed tax increase weighed on sentiment.

The benchmark Colombo stock index ended 0.32% weaker at 6,429.94, its lowest close since 1 August. It fell 0.34% last week, its fourth straight weekly loss.

A government proposal last week to raise the value added tax (VAT) to 15% from 11% hit sentiment on Tuesday.

“The downtrend continued today also. The selling pressure is there mainly on the shares that could be affected by the tax,” said Dimantha Mathew, head of research at First Capital Equities Ltd.

“Going forward, we don’t think this trend of correction will last long.”

Turnover stood at Rs. 458.6 million ($ 3.15 million), less than this year’s daily average of Rs. 740.4 million.

Foreign investors net bought Rs. 145.4 million worth of equities on Tuesday. They have net sold Rs. 2.1 billion worth of shares so far this year.

Distilleries Company of Sri Lanka fell 1.67%, with foreign investors buying a net 132,693 shares in the company on Tuesday.

The company said last month that it would rejig a share ownership with Melstacorp, its fully-owned subsidiary.

The reorganisation will occur after 30 September.

Shares of Ceylon Tobacco Company Plc fell 1.07%, while the biggest listed lender Commercial Bank of Ceylon Plc declined 1.13%.