Jan 30 (Reuters) - Sri Lankan shares fell 2.89 percent to a more than two-month low on Friday, their biggest fall since February 2011, led by blue chips on concerns over future earnings after the government imposed a retrospective 25 percent 'super gain tax' in its supplementary budget.
Sri Lanka's new government on Thursday announced a budget that imposed new taxes on cash-rich firms to pay for pay hikes for workers and tax cuts on key commodities, hoping to woo voters as it approaches a parliamentary election.
The main stock index, which fell as much as 2.89 percent during the day, ended 2.66 percent weaker, or down 196.46 points, at 7,180.05, its lowest since Dec. 1, Thomson Reuters data showed.
Finance Minister Ravi Karunanayake imposed a one-time super gain tax of 25 percent on individuals or companies that earned more than 2 billion rupees in profits in 2013/2014.
"Today's drop was led by the fall in the big caps after the budget," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.
"Interestingly huge net foreign buying was seen. With the net foreign inflow, the market fall might slowdown."
Foreign investors were net buyers of 451.3 million rupees worth of shares on Friday, reversing the net foreign trade so far this year to net buying. They have been net buyers of 120.1 million rupees. They bought a net 22.07 billion rupees worth of stocks last year.
Analysts said the market came off due to panic selling because of the super gain tax which affects large caps.
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 Company and Nestle as they would have to pay the new tax.
Shares in Dialog Axiata Plc fell 12.41 percent while conglomerate John Keells Holdings Plc fell 5.02 percent, and biggest listed lender Commercial Bank of Ceylon Plc lost 6.56 percent.
After the market closed John Keells posted a 28 percent gain in its third quarter net profits.
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 2.07 billion Sri Lankan rupees ($15.66 million), more than last year's daily average of 1.42 billion rupees, exchange data showed.
($1 = 132.1500 Sri Lankan rupees)
Sri Lanka's new government on Thursday announced a budget that imposed new taxes on cash-rich firms to pay for pay hikes for workers and tax cuts on key commodities, hoping to woo voters as it approaches a parliamentary election.
The main stock index, which fell as much as 2.89 percent during the day, ended 2.66 percent weaker, or down 196.46 points, at 7,180.05, its lowest since Dec. 1, Thomson Reuters data showed.
Finance Minister Ravi Karunanayake imposed a one-time super gain tax of 25 percent on individuals or companies that earned more than 2 billion rupees in profits in 2013/2014.
"Today's drop was led by the fall in the big caps after the budget," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.
"Interestingly huge net foreign buying was seen. With the net foreign inflow, the market fall might slowdown."
Foreign investors were net buyers of 451.3 million rupees worth of shares on Friday, reversing the net foreign trade so far this year to net buying. They have been net buyers of 120.1 million rupees. They bought a net 22.07 billion rupees worth of stocks last year.
Analysts said the market came off due to panic selling because of the super gain tax which affects large caps.
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 Company and Nestle as they would have to pay the new tax.
Shares in Dialog Axiata Plc fell 12.41 percent while conglomerate John Keells Holdings Plc fell 5.02 percent, and biggest listed lender Commercial Bank of Ceylon Plc lost 6.56 percent.
After the market closed John Keells posted a 28 percent gain in its third quarter net profits.
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 2.07 billion Sri Lankan rupees ($15.66 million), more than last year's daily average of 1.42 billion rupees, exchange data showed.
($1 = 132.1500 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anupama Dwivedi)
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