ECONOMYNEXT – Sri Lanka’s stock market dropped over 2.4 percent on Wednesday (09) as many investors were on the selling side to reduce exposure in a bear market amid concerns over a looming economic crisis, brokers said.
The main All Share Price Index (ASPI) fell 2.43 percent or 300.78 points to close at 12,081.69 points, its lowest since December 30. The drop erased 162 billion rupees of market capitalization and brought the index to an year-to-date loss of 1.18 percent, data showed.
“Many retailers have started to sell their shares to reduce the exposure and if this goes like this, there will be forced selling anyway due to margin credit,” a stockbroker said asking not to be named.
A leading market analyst said the market heavyweight Expolanka’s decline had resulted in the overall market fall.
“Whatever that happens with Expo, the market is following because every portfolio has Expo,” he said.
“With the fall in Expo, the buying power is also falling. We didn’t see a stabilisation today too but most probably we will see consolidation around the 11,800-12,000 range.”
He noted life-insurance sector shares were moving significantly.
Some analysts also said a 25 percent windfall tax in the style of a ‘super gains tax’ also dented investor sentiment.
Large caps like Expolanka and LOLC have dragged the index down in the past few days.
Investors have questioned the sustainability of earnings with the ongoing forex crisis most companies going through, analyst have said.
S&P SL20 of the more liquid index fell 2.71 percent or 113.02 points to 4,052.58.
Foreign investors, who are highly worried about possible sharp depreciation or devaluation in the currency, bucked the trend and bought a net of 26.8 million rupees and were net buyers for the second straight day.
The foreign sales so far this year has been 3.3 billion rupees. In 2021, the Sri Lanka stock market suffered a net foreign outflow of 50 billion rupees.
Analysts had predicted that the economic concerns would drag the market from time to time until the government finds a sustainable solution for the country’s looming debt crisis.
The day’s turnover was 5.2 billion rupees, less than this year’s daily average of 7.7 billion rupees.
Analysts said investors are worried about possible currency depreciation, the government’s ability to avert a sovereign debt default, and fuel shortages hitting factory manufacturing and thus hitting future earnings.
LOLC Holdings, Hayleys Holdings and Expolanka dragged the index down on Wednesday.
LOLC Holdings slipped 5.8 percent to 1,044.75 rupees a share, while Hayleys Holdings fell 5.6 percent to 118.25 rupees a share.
Expolanka, the market heavyweight which has export and freight businesses, lost 2.8 percent to close at 309.00 rupees. (Colombo/Feb09/2022)