COLOMBO, July 7 (Reuters) - Sri Lankan stocks on Friday ended at their highest in a week, underpinned by manufacturing and diversified shares while offshore investors continued to be net buyers.
Local investors, however, cautiously acquired shares amid concerns over a proposed tax bill.
Foreign investors net bought 179.9 million rupees ($1.17 million) worth of shares on Friday, extending their year-to-date net inflows to 22.7 billion rupees worth of equities.
The Colombo stock index ended 0.34 percent higher at 6,737.50, its highest close since June 30. The bourse lost 0.14 percent for the week.
"There were a lot of retail activities, and with that the mid-cap counters got activated other than the blue chips," said Dimantha Mathew, head of research, First Capital Holdings PLC.
"Foreign segment remained active and it added on to the turnover."
Analysts said new foreign investors are buying Sri Lankan shares since the Pakistan bourse was upgraded to emerging market from frontier market.
In May, index provider MSCI announced changes to its indexes as a result of its semi-annual market reclassification, including reclassifying Pakistan as an emerging market from frontier market status, and the addition of 57 securities and removal of 28 securities from its All-Country World Index .
The day's turnover was 937.4 million rupees, more than this year's daily average of 919.4 million rupees.
Brokers said local investors have been waiting for some clarity on the proposed inland revenue legislation, which some companies expect will result in higher cost of production.
The IMF, which has long urged Sri Lanka to boost tax revenue through modernisation and simplification of its fiscal system, has urged the government to submit to parliament a new Inland Revenue Act.
Shares of Richard Pieris Plc ended 9.6 percent higher, while conglomerate John Keells Holdings Plc closed 0.6 percent higher.
$1 = 153.5500 Sri Lankan rupees Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips