REUTERS - Sri Lankan shares closed at their lowest in nearly one week yesterday on worries earnings of financial firms would fall after the new budget proposals announced last week were implemented.
Foreign investment outflow also weighed on sentiment, while some investors waited for clues from the November monetary policy meeting scheduled at 1330 GMT, dealers said.
The main stock index ended 0.65 percent, or 45.85 points, weaker at 7,009.99, its lowest close since Nov. 18.
“Foreigners are backing down and are waiting to see how these budget proposals will be implemented,” said Yohan Samarakkody, head of research at SC Securities (Pvt) Ltd.
“They are also looking at political stability with the news that the government is finding it difficult to convince its own members to vote for the budget.”
Rating agency Fitch said yesterday that Sri Lanka’s 2016 budget provides no clear plan for fiscal consolidation over the medium term and the absence of such a framework will put more pressure on the fiscal deficit.
“Fitch believes there are risks to government being able to meet its fiscal deficit target, especially considering the trend in revenues in recent years,” the rating agency said.
The government on Friday announced a raft of steps, including the removal of a 0.3 percent share transaction levy, to stimulate trading in the share market and increase liquidity.
Shares of the country’s biggest listed lender, Commercial Bank of Ceylon Plc, fell 3.58 percent, while DFCC bank Plc dropped 3.88 percent.
Central Finance Company Plc fell 6.34 percent and Dialog Axiata Plc declined 1.83 percent.
Foreign investors were net sellers of Rs.240 million worth of equities yesterday, extending the year-to-date net foreign outflow to Rs.3.89 billion.
Turnover was Rs.828.9 million ($5.80 million), less than this year’s daily average of Rs.1.1 billion.
Fitch said on Monday that it maintained a negative outlook on the telecom sector based on uncertainty over proposals to increase taxes, which are likely to lower profitability and increase leverage, if implemented.
Sri Lanka’s stock and foreign exchange markets will be closed today for a Buddhist religious holiday.
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