ECONOMYNEXT – Sri Lanka stock index fell 0.52 percent on Friday (17) as investors looked for some cues on the interest rate and rupee exchange rate under the newly appointed central bank governor, brokers said.
Former State Minister for Money and Capital Markets Ajith Nivard Cabraal assumed duty as the 16th central bank governor on Wednesday. During his previous term from 2006-2015, analysts say there was an overall policy direction despite some hiccups.
“Investors are waiting to see the central bank’s directions under him, especially on the interest rates and exchange rate. Until then, we will see a market consolidation,” a Colombo-based stockbroker said, asking not to be named.
Foreign investors sold a net 504 million rupee worth of shares on Friday. The market has suffered a net foreign outflow of over 42.35 billion rupees so far this year.
The index closed 46.09 points down at 8,801.95 points. ASPI hit the day’s highest 8,863 immediately after but remained erratic throughout the day.
The S& P SL20 index of more liquid stocks fell 0.67 percent or 18.12 points to close at 3,291.87.
The market turnover for the day was 3.8 billion rupees, below this year’s average daily turnover of over 4 billion rupees.
The country’s risky assets have unusually gained partly due to record low-interest rates, excess liquidity in money markets, and some businesses being disrupted due to import controls triggered by money printing. The trend of net foreign selling has been continuing since early last year.
The central bank on Thursday lifted yield controls on next week’s 12-months Treasury bills auction abolishing a 12-month de facto policy rate through which large volumes of liquidity was injected, leading to forex shortages and reserves losses.
Brokers said the move could see investors shifting their funds from equity to fixed assets slowly.
Soon after assuming duty, Cabraal said he wanted fiscal discipline and to give directions to the market. Analysts expect him to deal with the forex concerns that had become a key risk in the market.
Importers have complained that they are compelled to pay nearly 15 percent more than the central bank’s official rate as state banks do not have adequate dollars.
Lower dollar inflows due to lower revenue from pandemic-hit tourism and declining remittances amid depleted foreign exchange reserves have put pressure on the exchange rate, brokers say.
On Friday, the government extended Covid-19 “conditional” lockdown until October 1 despite wide expectation of an ease in the lockdown.
“However, government essential services impacting the economy will be allowed to function. Conditions to be notified soon,” Health minister Keheliya Rambukwella said on his twitter platform.
The fall was led by Browns Investment, Hayleys and LOLC holdings.
Browns Investment, a subsidiary of LOLC Holdings down 3.13 percent to close at 9.30 rupees a share.
Hayleys PLC fell 3.24 percent to close at 99.90 rupees a share.
LOLC Holdings down 0.91 percent to close at 517.25 rupees a share.
Expolanka Holdings, the market heavyweight which has a significant export component in its business bucked the trend and gained 0.3 percent to close at 166.00 rupees a share.
The bourse saw 61 stocks gaining against 123 falling on Friday.
Brokers say the market could fall significantly if a market correction starts. (Colombo/September17/2021)