Sri Lankan shares post near four-month closing high

COLOMBO, May 9 (Reuters) – Sri Lankan shares edged up on Monday and hit their highest close in about four months, led by beverage and diversified stocks amid foreign investor buying.

However, the gains were capped as investors were worried that the island government’s move to increase value-added tax (VAT) and impose new taxes effective from May 2 would hit company bottomlines.

The benchmark stock index rose 0.04 percent to 6,594.80, its highest closing level since January 11, and the third session of gains.

The index gained 1.2 percent last week, its fifth straight weekly rise. The 14-day relative strength index ended at 78.277 on Monday, compared with Friday’s 78.147, Thomson Reuters data showed. A level of 70 and above indicates that the market is overbought.

"The market saw some volatility today as the index is in overbought region, and we will see some profit-taking here and there," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

Foreign investors, who have sold equities worth Rs2.85 billion ($19.59 million) so far this year, were net buyers for the third straight session on Monday. They bought a net Rs27.7 million worth of shares.

Turnover stood at Rs595.2 million, well below this year’s daily average of around Rs774.9 million.

Shares of Ceylon Tobacco Company Plc rose 0.84 percent, while conglomerate John Keells Holdings Plc gained 0.64 percent.

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