Sri Lankan shares fall for 7th session; tax proposals weigh on market

COLOMBO, Nov 22 (Reuters) – Sri Lankan shares extended their falls into a seventh session on Tuesday, posting their lowest close since July 4, as investor sentiment was hit by budget tax proposals, including revisions in corporate and withholding taxes.

The government aims to boost its 2017 tax revenue by 27 percent to Rs1.82 trillion (then $12.35 billion) year-on-year, and meet a commitment given to the International Monetary Fund in return for a $1.5 billion loan in May.

The benchmark index of the Colombo Stock Exchange ended down 0.31 percent, or 19.28 points, at 6,255.98. It has declined 2.57 percent over the past seven sessions after the budget was presented on November 10.

The index was in oversold territory, with the 14-day relative strength index at 16.929 versus Monday’s 18.405, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

"Investors stayed on the sidelines while the economy is getting squeezed and earnings are taking a hit," said Yohan Samarakkody, head of research at SC Securities (Pvt) Ltd.

The market was also hit by continued foreign investor selling following Donald Trump’s win in the US president election, he added.

The market shrugged off a move by the Securities and Exchange Commission to change the minimum floating rule to raise market liquidity.

Foreign investors sold a net Rs8.76 million ($59,189.19) of shares on Tuesday, extending the year-to-date net foreign outflow to Rs1.16 billion of shares.

Analysts said the increase in various taxes and fees would reduce the disposable income of people and challenge consumption-led growth.

Turnover was Rs649 million, less than this year’s daily average of R700.6 million.

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Shares of DFCC Bank Plc fell 1.64 percent, while Lanka ORIX Leasing Company Plc declined 2.56 percent.

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