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Tuesday May 17th, 2022

Sri Lanka stock index plunges on illiquid shares, Omicron variant amid power outage

ECONOMYNEXT – Sri Lanka stocks nosedived on Friday (03), falling for a third straight session dragged down by low float shares like Commercial Leasing and Finance and LOLC Finance and due to concerns over possible lockdown after the detection of the latest COVID-19 variant ‘Omicron’ amid a countrywide power outage, brokers said.

All Share Price Index plunged 2.35 percent or 263.98 points lower to 10,988.32.

The S&P SL20 index of the most liquid share fell 0.66 per cent or 25.78 points to close at 3,887.10.

“The market reacted to three-points – the detection of Omicron variant in the country, overall power outage experienced island wide which happened during the trade hours, but encompassing all of those was there was a large amount of selling on illiquid low float counters such as CLC and LOFC,” a Colombo-based analyst said.

This is the highest loss in a day recorded in two weeks, First Capital said.

CLC and LOFC have been stagnating for a while when other retail shares have moved up, brokers said.

However, analysts warned that although shares are illiquid, they are index heavy so if it further drops it would affect the retail shares thereby affecting the whole market.

Analysts say when retail stocks start to fall there could be an overall market correction.

“But the overall picture is that these shares are on their way down. There could be a huge decline going forward,” a top analyst said.

Some analysts said the market is still uncertain about how the government is going to manage the looming debt and current foreign exchange crisis.

Central Bank Governor Ajith Nivard Cabraal last week said the IMF could ask the country to depreciate the rupee under its reform agenda if Sri Lanka goes to the global lender.

Foreign investors bought a net 6.9 million rupees worth of shares on Friday, but the market has suffered a net foreign outflow of 49.4 billion rupees so far this year.

Sri Lanka’s President over the weekend said he will have to take a lot of unpopular decisions, which investors speculate could be a rupee depreciation.

A currency depreciation will help companies with export business to earn more profit in local currency.
With the new Omicron variant being identified and the fear of other businesses getting affected, more investors seemed to move for the health sector and export-oriented stocks, stockbrokers said.

The day’s turnover was 7.08 billion rupees above this year’s average daily turnover of 4 billion rupees.

Commercial Leasing and Finance Plc nosedived 21.02 percent to close at 40.80 rupees a share and LOLC Finance closed 8.59 percent down at 23.50 rupees a share.

LOLC Development Finance fell 10.40 percent to close at 394.00 rupees a share.

Expolanka, the market heavyweight which has a significant component of export and freight business, slipped 1.15 percent to close at 280.25 rupees a share. (Colombo/Dec3/2021)


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