(Colombo) REUTERS: Sri Lankan shares and rupee ended higher yesterday, a day after the government said it has decided to reduce value-added tax to 8 percent from 15 percent with effect from December 1, along with plans to abolish some other taxes as well.
The gains also come a day ahead of the Central Bank’s key monetary policy rate decision, which is likely to be left steady at a policy review today, a Reuters poll indicated.
The benchmark stock index jumped 1.34 percent to 6,201.12, its highest since June 25, 2018. The bourse gained 1.6 percent last week, and is up 1.10 percent for the year.
Analysts said positive sentiment surrounding tax cuts by the country’s newly elected president helped.
“The market expects a booming consumer demand due to the tax cut,” said Dimantha Mathew, Head of Research at brokerage First Capital Holdings.
The rupee ended 0.11 percent firmer at 180.60/80 per dollar, compared to Wednesday’s close of 181.80/181.10, Refinitiv data showed. It is up 0.5 percent so far this year.
Foreign investors were net sellers for 23 sessions out of 25.
They sold a net Rs.821.2 million (US$ 4.56 million) worth of shares yesterday, extending the net selling so far this year to Rs.10.3 billion worth of equities, according to index data.
Equity market turnover was Rs. 2.78 billion, more than this year’s daily average of about Rs. 721 million. Last year’s daily average was Rs.834 million.
Meanwhile, foreign investors were net buyers of government securities on a net basis for the fifth straight week, purchasing a net Rs.0.21 million worth of government securities in the week ended Nov. 20.
Total foreign outflows from government securities through Nov. 20 stood at Rs.48 billion, according to the Central Bank data.