ECONOMYNEXT – Sri Lanka stocks slipped 1.35 percent on Friday (09) as import restrictions and an increasing difference between dollar buying and selling weighed on the sentiment, brokers said.
The index gained over 2.5 per cent on Thursday rising for the first time in five sessions and recovering from Wednesday’s largest percentage fall since February 22 on Wednesday.
The Finance minister’s statement on the grim reality of the economy and external sector, unavailability of dollars at the central bank’s official rates, and import restrictions announced by the central bank have weighed on investor sentiment.
“In addition to these, some brokers have raised concerns over the valuation of the stocks which are pushing the index,” a broker said, asking not to be named.
The index closed 121.10 points down at 8,865.30 points after opening well past 9,000 psychology benchmark level. But it tumbled throughout the day to settle slightly above the day’s lowest 8,843.60.
On Thursday, the government announced further import restrictions on items ranging from chocolates and wine to raincoats and carpets as the country faced foreign exchange shortages as large volumes of money were printed.
Banks have also been barred from giving credit for importers to meet the margins, according to a new central bank circular.
Analysts say the difference between the central bank’s rate and open market rate to buy dollars has been on the rise and some have said it is as high as 40 rupees. They said it could have an impact on the companies which have import components in their business.
The S& P SL20 index of more liquid stocks fell 1.36 percent or 45.92 points to close at 3,330.12.
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.
Sri Lanka extended its COVID-lockdown till September 21 citing that with numbers slowly declining and the government is confident that the country will be able to reopen without risk.
Foreign investors sold a net 51.3 million worth of shares on the market. The market has suffered a net foreign outflow of over 41 billion rupees so far this year.
The day’s turnover was 6.9 billion rupees, just over this year’s average daily turnover of over 4 billion rupees.
The fall was led by LOLC holdings, Brown Investments and Expolanka.
LOLC Holdings slipped 4.82 percent to close at 533.25 rupees a share.
Browns Investment, a subsidiary of the LOLC, is down 7.00 percent to close at 9.30 rupees.
Expolanka Holdings, the market heavyweight which has the highest market capitalization in the market and a significant export component in its business, dropped 2.71 percent to close at 170.25 rupees a share.
Expolanka in a disclosure to the bourse said it had bought a 100 percent stake in US-based Complete Transport System LLC through one of its overseas units 6.1 million US dollars.
The bourse saw 60 stocks gaining against 139 falling on Friday.
Brokers say the market could fall significantly if a market correction starts. (Colombo/September 10/2021)