ECONOMYNEXT – Sri Lanka’s stock market gained on Tuesday (18) to a fresh all-time high after the country settled 500 million US dollar International Sovereign Bonds (ISB), but the gain was capped by concerns over possible policy rate hike later this week, brokers said.
Sri Lanka has transferred funds to settle 500 million US dollar ISB matured on Tuesday, Central Bank Governor Ajith Nivard Cabraal said. The bond settlement comes after a raft of sovereign credit downgrading by global rating agencies since April 2020 and that increased the risk of Sri Lanka defaulting on a sovereign debt.
An analyst said some value counters moved the market on Tuesday after a long weekend. The markets were closed on both Friday and Monday for religious holidays.
Foreign investors bought a net of 14 million rupees, but the bourse had suffered a net foreign selling of 2 billion rupees so far this year. In 2021, the Sri Lanka stock market suffered a net foreign outflow of 50 billion rupees.
Despite expected better earrings in the December quarter, lingering currency depreciation concerns had weighed on the foreign investor sentiment.
The main All Share Price Index (ASPI) closed 0.89 percent or 118.71 points up on Monday to close at 13,457.20 points, its record closing high.
S&P SL20 of the more liquid index too gained 1.39 percent or 63.51 points to 4,618.45.
Analysts said people are expecting better earnings from all the companies in the December quarter.
Corporate earnings are expected to be released this week onward.
The day’s turnover of 7 billion rupees, more than last year’s daily average of around 4 billion rupees.
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 8.45 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.
On Monday Expolanka Holdings, Vallibel One, and LB Finance pushed the main index.
Expolanka, the market heavyweight, has export and freight businesses, closed 2.53 percent higher at 394.50 rupees a share, Vallibel One gained 10.93 percent to close at 97.40 rupees a share, while L B Finance gained 16.21 percent to close at 88.20 rupees a share.