Stock market posts over 6-week closing low on VAT hike concern

REUTERS: Sri Lankan shares posted their lowest closing level in more than six weeks on Thursday, as a government proposal to raise the value added tax (VAT) weighed on markets.

The Government on Wednesday said the Cabinet has approved a proposal to increase the VAT to 15% from 11% with some amendments, a move halted by the Supreme Court earlier. The hike is expected to be implemented after parliamentary approval later this month.

The benchmark Colombo stock index ended 0.31% weaker at 6,472.47, its lowest close since Aug. 1. It fell 0.34% for the week, its fourth straight weekly loss. Both the stock and foreign exchange markets will be closed on Friday for a holiday.

“It was a very dull day as investors are waiting for directions. But the VAT decision was a bit of a concern for investors,” said Yohan Samarakkody, Head of Research at SC Securities Ltd.

Turnover stood at Rs. 301.2 million ($ 2.07 million), less than half of this year’s daily average of Rs. 744.6 million.

Foreign investors were net sellers of Rs. 19.9 million worth of shares on Thursday, extending the net foreign outflow so far this year to Rs. 2.31 billion worth of equities.

Shares of Ceylon Tobacco Company Plc dropped 1.2%, while conglomerate John Keells Holdings Plc dropped 0.5%.

Sri Lanka Telecom Plc fell 1.6%, while Dialog Axiata Plc declined 0.9%.