COLOMBO, Feb 2 (Reuters) - Sri Lankan shares fell to over five-month lows on Monday due to panic selling in blue-chips, led by John Keells Holdings Plc as concerns over future earnings weighed on sentiment after the government raised taxes on cash-rich firms.
The index has fallen 5.10 percent since Sri Lanka’s new government on Thursday announced a budget that imposed a one-time ‘super gain tax’ of 25 percent on companies or individuals who earned over 2 billion rupees profits in 2013/2014.
The main stock index, ended 2.51 percent, or 179.99 points, down at 7,000.06, its lowest since Aug. 28.
The day’s fall erased market capitalisation by 76.3 billion rupees ($577.2 million) on Monday after erasing 83.2 billion on Friday. The market is valued at 2.97 trillion rupees as on Monday.
“There was lot of panic selling, Keells is the main reason for today’s fall,” said Reshan Wediwardana, research analyst at First Capital Equities (Pvt) Ltd.
“Still it’s not clear how the super gain tax is going to be charged,” he said.
Shares in conglomerate John Keells Holdings Plc fell 6.22 percent, while biggest listed lender Commercial Bank of Ceylon Plc declined 4.34 percent, and Dialog Axiata Plc fell 6.67 percent.
Analysts said the market would continue to fall on ‘super gain tax’ worries and the reaction of foreign investors would be the key.
Foreign investors were net sellers of 180.4 million rupees worth of shares on Monday, turning the year to date net foreign trade to an outflow of 60.23 million rupees. They bought a net 22.07 billion rupees worth of stocks last year.
Analysts said the market would trade lower in the coming days on selling in top conglomerate John Keells Holdings , Dialog Axiata, Sri Lanka Telecom, Ceylon Tobacco Co and Nestle as they would have to pay the new tax.
After the market closed on Friday John Keells posted a 28 percent gain in its third quarter net profit.
Analysts, however, expect the raft of tax concessions and salary hikes in the budget to increase consumers’ disposable income and help the market rally over the long term.
Turnover was 1.3 billion Sri Lankan rupees ($9.83 million), less than last year’s daily average of 1.42 billion rupees, exchange data showed.
Markets will be closed for a Buddhist and Independence Day holidays on Tuesday and Wednesday respectively. Normal trading will resume on Thursday. ($1 = 132.2000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)