Sri Lanka stock market slump draws foreign buyers

EconomyNext – Foreign investors made use of the collapse in Sri Lankan share prices after a government budget imposed hefty new taxes on large companies to emerge as net buyers last week, brokers said.

The government’s interim budget imposed a 25 percent retroactive ‘super gain’ tax on companies which earned over two billion rupees as well as other one-off taxes on telecom and liquor firms.

The new taxes aimed at increasing government revenue largely to fund a massive pay hike given to state workers.

The tax hikes triggered panic selling on the Colombo bourse but foreign buyers were on the buying side, Barleet Religare Stockbrokers

"Foreigners remained largely positive during the week, and emerged as net buyers recording a cumulative net foreign inflow of 899.57 million rupees.

First Capital Equities said net foreign buying on a year-to-date basis turned positive last week with improved foreign participation of 37 percent and turnover also up by 37 percent from the week before.

"Despite a number of one-off taxes implemented by the budget we remain extremely positive on the market and believe that investors should take the current panic selling as a golden opportunity to buy further into the market," it said.

"The super gains tax is likely to affect historical profitability while future earnings of most companies are likely to record strong growth."

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