Shares snap 8 sessions of falls on foreign buying

Reuters: Shares closed higher for the first time in nine sessions on Thursday as foreign investors bought beaten-down stocks, although worries over new tax proposals limited the upside.

Foreign buying accounted for about two-thirds of the day’s turnover of Rs. 1.07 billion ($ 6.67 million) which was better than this year’s daily average of Rs. 826 million.

Foreign investors purchased a net Rs. 82.5 million of shares, making them net buyers for the first time in six sessions. They sold a net Rs. 888.8 million in the previous five sessions, taking the total net outflow so far this year to Rs. 3.44 billion.

The Colombo stock index rose 0.25% to 6,055.76, edging up from its lowest close since 30 March 2017 hit in the previous session. It has declined about 4.8% so far this year. “The market is up on foreign buying. Local investors are still on the sidelines with the proposed new taxes. We saw foreigners returning to the market with the index hovering near 6,000 mark as it is attractive to them,” said Dimantha Mathew, head of research at broker First Capital Holdings. Banking and telecom stocks were recently under pressure after a local media reported last week that the government planned to impose new levies on these sectors to boost revenue, analysts said. Lacklustre corporate results and a Moody’s report saying Sri Lanka could face significantly tighter external refinancing conditions in the next five years, have also dented investor appetite for riskier assets, analysts said.

Market heavyweight John Keells Holdings gained 0.9%, while Lanka ORIX Leasing Co Plc rose 3.3%.

The Central Bank left its key policy rates unchanged, as expected, on 3 August, 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% in 2018, falling short of an earlier estimate of 5%.