ECONOMYNEXT - The rupee ended sharply lower Wednesday, falling to a new low of 178.40/70 rupees against the US dollar, as gilt yields edged higher and stocks closed flat amidst a worsening political crisis resulting in ratings agency Moody's downgrading the island's sovereign and three banks, market participants said.
Importer demand and foreign selling in the bond market was pressuring the currency, they said.
The rupee closed Monday at 177.30/50 rupees against the greenback. Markets were closed Tuesday.
On Tuesday, Moody's Investors Service, a rating agency, cut Sri Lanka's speculative B2 rating to B1 and on Wednesday followed that up with similar downgrades of three banks, Bank of Ceylon, Hatton National Bank and Sampath Bank.
"Moody's would consider downgrading the rating if external and domestic financing conditions were to deteriorate further than currently expected," the rating agency said.
"In particular, a larger drain on foreign exchange reserves would increase the risk of lower capital inflows and sharply raise refinancing costs," it said.
"This would contribute to repayment stresses that would be more consistent with a B3 rating."
A bond maturing in 2021 closed at 11.80/12.00 percent, up sharply from Monday's closing of 11.50/70 percent.
A five year bond maturing in 2023 ended higher at 11.90/12.20 percent, up from the previous closing of 11.70/85 percent.
A bond maturing in 2027 settled at 12.40/50 percent, slightly up from Monday' closing of 12.25/30 percent.
In equities, Colombo's benchmark All Share ended a marginal 0.04 percent higher, up 2.29 points to 5,950.19, and the S&P SL20 of more liquid stocks gained 0.01 percent, up 0.45 points to 3,114.51.
Market turnover was 594.1 million rupees with 49 stocks gaining in the day against 56 that declined.
The benchmark index was driven by gains in Dialog (up 20 cents to 11.70 rupees), John Keells Holdings (up 90 cents to 154 rupees) and LOLC Holdings (up 2.40 rupees to 89.90 rupees).
Nestle Lanka was down 17.20 rupees to 1,625 rupees and Sampath Bank was down 3.20 rupees to 230.40 rupees.
There were four crossings, or off-market negotiated trades, in NDB Bank for 235.8 million rupees, accounting for nearly 40 percent of market turnover.
NDB Bank ended 1.90 rupees higher at 105.60 rupees.
Net foreign buying was 10.2 million rupees, up from selling of 147 million rupees on Monday.
Foreign buying in NDB Bank was 127.5 million rupees, according to Asia Securities. There was 96 million rupees worth of foreign selling in John Keells Holdings. (COLOMBO, 21 November 2018)