ECONOMYNEXT – Sri Lanka shares slipped at the close on Thursday as selling pressure increased following the government’s decision to relax import restrictions imposed two years ago, an analyst said.
The government plans to lift import controls on 100 items that were banned during forex shortages in the past two years, which had been hurting small and medium-sized industries, State Minister for Finance Shehan Semasinghe said.
“Stocks went down due to selling pressures resulting from relaxed import restrictions, which are expected to reduce the monopolistic powers held by domestic retailers,” an analyst said.
The main All Share Price Index was down 0.48 percent or 42.45 points at 8,712.72, while the most liquid index, S&P SL20, was down 0.27 percent or 6.73 points at 2,493.82.
The main reason for the market’s negative sentiment is the loss of monopoly as import restrictions ease, an analyst said.
The top losers during trading were Vallibel, Expolanka, and DFCC Bank.
“Vallibel One was bringing the market down due to its tile holdings, which are affecting the entire market,” an analyst said.
Sri Lanka’s central bank has terminated the cash margin requirement on import letters of credit that was imposed over the previous 12 months to limit imports, as liquidity injection triggered forex shortages and a currency collapse.
In an order issued under the monetary law, the central bank imposed a 100 percent cash deposit margin on 843 imports on May 19, 2022, and February 16, 2023, to discourage imports.
Sri Lanka had controlled imports of 3,000 items denoted by HS codes out of a total of 8,000 during the past two years.
The controls were then brought down to 1,000 as they were hurting small and medium-sized industries that depended on inputs.
“By the beginning of next month, we will be able to lift controls on another 100 items,” Minister Semasinghe told parliament.
The market generated revenue of 893 million rupees, while the daily average turnover was 1.2 billion rupees.
The market generated a foreign inflow of 507 million rupees, the highest inflow since February 08. The net foreign inflow was 494 million rupees.(Colombo/May 25, 2023)