Stock market snaps 5-day winning streak on tax woes

Reuters: Shares ended weaker on Wednesday, snapping five straight sessions of gains, as worries about tax hikes dented sentiment.

Brokers said investors were worried over a tax hike, which takes effect from Monday, as it could hit the bottomlines of companies. However, a loan deal with the International Monetary Fund last week limited the fall.

The benchmark stock index fell 0.22% to 6,568.85, slipping from its highest close since 11 January hit on Tuesday.

“We saw some selling pressure come in as the outlook does not seem that great as the VAT (Value-Added Tax) revision is going to impact,” said Dimantha Mathew, Head of Research, First Capital Equities Ltd.

The Finance Minister on Sunday said the Government is seeking to raise Rs. 100 billion in revenue in 2016 by increasing VAT and from new taxes, effective Monday.

The rise in market interest rates also weighed on sentiment with yields on short-term Government securities climbing seven to 10 basis points to a more-than-two-year high at a weekly auction on Wednesday.

Foreign investors were net sellers of Rs. 105.1 million worth of shares on Wednesday, extending the year-to-date net foreign outflow to Rs. 3.07 billion worth of shares.

Turnover stood at Rs. 1.03 billion ($7.06 million), more than this year’s daily average of around Rs. 779 million.

The IMF said on Friday it reached an agreement with the Sri Lankan Government for a $1.5 billion bailout to help the island nation avert a balance of payments crisis.

The three-year loan will require IMF board approval in June, the global lender said, and is subject to Sri Lanka implementing reforms, including streamlining the tax code and reducing a bloated deficit.

Shares in Ceylinco Insurance Plc dropped 0.34% while Ceylon Cold Stores Plc fell 3.6% and conglomerate John Keells Holdings eased 0.51%.