August 17, 2018 / 11:29 AM / a month ago

Sri Lankan shares hit over 7-week closing low on foreign selling

COLOMBO, Aug 17 (Reuters) - Sri Lankan shares extended losses for a sixth straight session on Friday, marking their lowest close in more than seven weeks, as foreign investors trimmed equity exposure amid fears that the government may introduce new taxes on several sectors.

Foreign investors sold shares worth a net 229 million rupees ($1.43 million) on Friday, extending the foreign outflow to a net 839 million rupees in the last three sessions. They have sold a net 3.46 billion rupees worth of equities so far this year.

Lacklustre corporate results, fears of new taxes in several sectors and a Moody’s report dented investor appetite for riskier assets, analysts said.

A local daily reported that a number of changes proposed in the Finance Act will impose new levies on several sectors including telecom, vehicle imports and tourism.

Meanwhile, Moody’s Investor Service said Sri Lanka could face significantly tighter external refinancing conditions in the next five years..

The Colombo stock index fell 0.53 percent to 6,051.10, its lowest close since July 4. It has declined about 5 percent so far this year.

“There was no change in sentiment. Reports of new taxes on the finance sector brought the index down,” said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

“We need some substantial buying either from foreign or local investors to boost the sentiment.”

Turnover for the day stood at 569.4 million rupees on Friday, less than this year’s daily average of 831 million rupees.

However, global stocks rose on Friday as news of a fresh round of U.S.-China trade talks soothed nerves even as the recovery in Turkey’s lira ran out of steam.

Shares in John Keells, which accounted for more than a third of the day’s turnover, fell 0.1 percent. Large-cap stock Ceylon Tobacco Company Plc fell 2.2 percent.

The central bank left its key policy rates unchanged, as expected, on Aug. 3, citing its goals of stabilising inflation and fostering sustainable economic growth.

Central bank Governor Indrajit Coomaraswamy said the economy was unlikely to grow more than 4 percent in 2018, falling short of an earlier estimate of 5 percent. ($1 = 160.4000 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Vyas Mohan)

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