ECONOMYNEXT – Sri Lanka’s stock market fell on Tuesday (11) for the second consecutive day on profit-taking with analysts citing the fall as a “needed correction” after a nine-session gain ahead of the December quarter earning release, brokers said.
The main All Share Price Index (ASPI) closed 0.29 percent or 37.42 points down on Tuesday to close at 13,079.65 points.
“We saw the previous sessions selling pressure continue in the market today. However, this is a needed correction,” a market analyst told ECONOMYNEXT.
He added that expected power cuts also dragged the market as the move was expected to reduce output and eventually hit the profits of listed firms.
ASPI slipped twice in the first-half of the trading day but recovered to the same levels and slipped right before close.
“The quick recovery in the market also indicates that this sentiment will be short-lived and the market will continue to be on the green as investors have nowhere to put their money in,” the analyst explained.
On Monday, the index’s fall was the largest intraday loss in 5-weeks.
Foreign investors sold a net of 43 million rupees, extending the net foreign selling to 1.74 billion rupees so far this year. In 2021, Sri Lanka stock market suffered a net foreign outflow of 50 billion rupees.
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.
The day’s turnover of 7.9 billion rupees was around two times of last year’s daily average of around 4 billion rupees.
S&P SL20 of the more liquid index fell 0.41 percent or 18.57 points to 4,525.86.
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 8.4 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 gray 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.
Kapruka Holdings, an online delivery firm, which launched trading on Friday closed 2.90 percent lower at 20.10 rupees, still above its IPO price of 15.40 rupees. The firm offered 32.8 million shares at 15.40 rupees and was oversubscribed 5.8 times at its IPO.
On Tuesday Expolanka, LOLC Holdings dragged the ASPI.
LOLC Holdings fell 1.40 percent to close at 1,336.25 rupees a share, Expolanka, the market heavyweight, which has export and freight businesses, slipped 1.42 percent to close lower at 381.75 rupees a share.
Commercial Leasing and Finance fell 1.69 percent to close lower at 29.10 rupees a share.