COLOMBO, Feb 12 (Reuters) - Sri Lankan shares fell on Monday as political uncertainty after a local council poll in which the two main ruling parties were defeated dampened investor sentiment.
President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP) and Prime Minister Ranil Wickremesinghe’s centre-right United National Party (UNP) secured only a few council seats, raising concerns over the future of the current unity government that took office in August 2015.
The Colombo stock index ended 0.45 percent lower at 6,542.99, slipping from its highest close since Nov. 8 hit on Friday. The index gained 0.8 percent last week, its third straight weekly increase.
Shares in conglomerate John Keells Holdings Plc fell 2 percent, while Sri Lanka Telecom Plc ended 3.8 percent weaker and biggest listed lender Commercial bank of Ceylon Plc lost 1.01 percent.
“The uncertainty after the defeat brought down the market. Investors will wait to see some stability and directions on how both the coalition partners are going to go forward with a stable government,” said Prashan Fernando, chief executive officer at Acuity Stockbroker.
The surprise win by a political party backed by former president Mahinda Rajapaksa, who lost the presidential poll in 2015, could undermine the island nation’s unity government and its reform agenda, analysts said.
Rajapaksa’s Sri Lanka Podujana Peramuna (SLPP) won control of 231 local councils out of a total 340, while Wickremasinghe’s centre-right United National Party (UNP) took 34 councils and the rest were split among other parties.
Rajapaksa on Monday called for parliament to be dissolved and fresh elections to be held after the party he backed swept local council polls in the strongest rebuff yet to the unity government.
Turnover stood at 597.6 million rupees ($3.86 million), well below last year’s daily average of 915.3 million rupees.
Foreign investors, however, bought a net 289.2 million rupees worth of shares on Monday, extending the year-to-date net foreign inflow to 5.3 billion rupees worth of equities.
The markets will be closed for a public holiday on Tuesday. Normal trading will resume on Wednesday.
$1 = 154.9000 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath