Shares hit 7-wk closing low; Distilleries down

REUTERS: Sri Lankan shares fell for a third straight session yesterday to post their lowest closing level in seven weeks, led by Distilleries Company of Sri Lanka due to selling by foreign investors ahead of a change in company ownership.

The benchmark Colombo stock index ended 0.34 percent weaker at 6,450.44, its lowest close since August 1. It fell 0.34 percent last week, its fourth straight weekly loss.

A government proposal to raise the value-added tax (VAT) also weighed on sentiment.

The government said last week the Cabinet has approved a proposal to increase VAT to 15 percent from 11 percent with some amendments, a move halted by the Supreme Court earlier.

Distilleries fell 4 percent, with foreign investors selling a net 13,600 shares in the company yesterday.

The company said last month that it would rejig a share ownership with Melstacorp, which is its 100 percent-owned subsidiary.

In a 180-degree share swap, Melstacorp would become the holding company, while Distilleries Company would become a subsidiary of Melstacorp. Investors would be allotted four shares of the new parent company for each share of Distilleries after the reorganisation, it said.  The reorganisation will occur after September 30.

“Distilleries dragged the market due to foreign selling. Investors are also not sure how the VAT hike would impact the corporate earnings,” a stockbroker said asking not to be named. Turnover stood at Rs.328.5 million, less than half of this year’s daily average of Rs.742.1 million. Foreign investors net bought Rs.63.9 million worth of equities yesterday. They have net sold Rs.2.25 billion worth of shares so far this year. Lanka ORIX leasing Company PLC fell 1.31 percent, while the biggest listed lender Commercial Bank of Ceylon PLC declined 0.42 percent.