ECONOMYNEXT – Sri Lanka’s stock market marginally gained on Wednesday (12) after falling two straight sessions on profit-taking while foreign investors exited from the market over lingering currency depreciation concerns ahead of December quarter earning release, brokers said.
Foreign investors sold a net of 117 million rupees, extending the net foreign selling to 1.8 billion rupees so far this year. In 2021, Sri Lanka stock market suffered a net foreign outflow of 50 billion rupees.
The main All Share Price Index (ASPI) closed 0.33 percent or 43.30 points up on Wednesday to close at 13,122.95 points.
However, S&P SL20 of the more liquid index closed in red, slipping 0.48 percent or 21.73 points to 4,497.21.
An analyst told ECONOMYNEXT that although the market slipped, the movement of the curve within the day indicated the market will recover soon as investors have nowhere to invest their money in.
On Monday, the index’s fall was the largest intraday loss in 5-weeks.
Analysts also said people are also expecting better earnings from all the companies in the December quarter. Corporate earnings are expected to be released later this week onward.
The day’s turnover of 7.7 billion rupees was around two times of last year’s daily average of around 4 billion rupees.
Analysts say many investors are now coming into stocks because of negative returns and see high turnovers these days after the market return jumped to 80 percent last year.
Sri Lanka’s fixed income yields are below 8.45 percent, well below the double digit inflation recorded in December due to excess money printing by the central bank. As a result, many investors are shifting their funds to risky assets, analysts said.
Analysts say foreign investors had been leaving due to speculation of sharp depreciation in the local rupee currency as the central bank has been holding it at around 200 level against the US dollar while local importers say they are compelled to buy dollars above 250 rupees in the grey market amid tough import curbs.
Sri Lanka is facing a risk of sovereign debt default after a series of credit downgrading by all three global rating agencies, but the government has said it will repay all the loans despite the reserves plummeting to its lowest in more than a decade in November last year. However, the central bank said the reserves have jumped to around 3.1 billion US dollars by end 2021 without disclosing the source of inflow.
The stock market has been the key investment tool for local investors amid excess money printing by the central bank in a lower interest rate regime. Many companies also listed themselves last year to use a tax concession for listing.
On Wednesday Sri Lanka Telecom, Hunas Falls, and Dialog Axiata pushed the main index
Sri Lanka Telecom, the country’s top fixed-line phone operator, gained 24.83 percent to close at 54.80 rupees a share, Hunas Falls Hotels gained 49.70 percent to close at 2,778.50 rupees a share while Dialog Axiata closed up 5.45 percent to 11.70 rupees a share.
Expolanka, the market heavyweight, which has export and freight businesses, slipped 0.79 percent to close lower at 378.75 rupees a share.