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Sri Lanka stocks down 20-pct in 2020 as S&P Index hits time low on Coronavirus fears

ECONOMYNEXT – Sri Lanka’s stocks closed 2.89 percent lower on Friday, extending losses in line with Coronavirus hit markets elsewhere with the S & P SL20 Index falling to an all time low, Colombo Stock Exchange provisional data showed.

The benchmark Colombo All Share Price Index fell 144.8 points to 4,874 points, dipping below the psychological 5,000 points hitting a new 8-year low.

The index last hit 4874.36 points on July 24, 2012, Colombo Stock Exchange data showed.

The Colombo Stock Exchange placed the third trading halt in the week on Friday as the S &P SL 20 Index of liquid share fell over 5 percent in intra-day trade hitting an all time low, but the index closed 3.82 percent lower recovering some losses.

The S&P SL 20 Index is down 25 percent in 2020.

Many global markets have also been roiled with investor fears over Coronavirus but some foreign investors have been cutting long-held positions in blue chip Sri Lanka stocks before the pandemic began.

“Many stocks are at attractive valuations, but investors are still uncertain,” a broker said. “Foreign selling is also a drain on liquidity, which has dented sentiment. Bu there are opportunities for bottom fishers.”

Some listed companies are facing supply chain pressures, though they are expected to be temporary.

Panic buying has already boosted sales of supermarkets.

Sri Lanka is also going through a cyclical recovery, from a collapse of the soft-peg with the US dollar in 2019.

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But a steep cut in value added tax had also spooked rating agencies and foreign investors.

Foreign investors have also been selling out of Sri Lanka rupee bonds, partly due to the steady loss of credibility of Sri Lanka’s rupee soft-peg with the US dollar in recent years, analysts say.

The central bank is narrowly targeting an overnight rate, which some analysts have identified as a key risk to monetary stability.

Up to 2020 the central bank also operated a one sided disorderly market conditions rule (DCM), where the rupee was undefended when liquidity injections pressured the peg, but heavy interventions were made to stop the currency appreciating, when credit was weak, especially in 2017.

A pegged currency generally falls when credit demand is strong and liquidity injections are made to keep rates down.

Sri Lanka’s private credit is still low but in February a 24 billion rupee profit transfer was made to the Treasury which can generate some demand, analyst say. In January private credit was flat.

On Friday liquidity shot up with banks dumping 74 billion rupees in the excess liquidity window and the central banks Treasury bill stock which represents money printing jumping 50 billion rupees to 128 billion.

On Friday index-heavy John Keells Holdings, where foreign investors have positions, closed down 5.60 rupees at 125.70 rupees a share.

Asian Hotels and Properties gained 50 cents to 29.00 rupees.

Galadari Hotel Lanka gained 40 cents to 6.40 rupees a share while John Keells Hotels fell 30 cents to 7.20 rupees a share.

Sampath Bank closed 5.20 rupees down at 134.80 rupees.

Hatton National Bank finished 5.80 rupees down at 120.20 rupees.

Dialog Axiata, where foreigners have positions was down 70 cents to 9.50 rupees.

Sri Lanka Telecom stocks fell 20 cents to 23.90 rupees a share. (Colombo/ Mar 13/ 2020)

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