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Wednesday June 19th, 2024

Sri Lanka stocks ease from record highs, punters pounce on banks

ECONOMYNEXT – Sri Lanka stocks fell 1.4 percent from a record high on Wednesday as some high flying stocks lost steam to profit taking but buyers have latched on to banks have been trailing the market up to now, brokers said.

Colombo’s All Share Price Index fell 1.43 percent or 113.69 points to close at 7,808.97 from Monday’s all-time high stock exchange provisional data showed.

ASPI Started positive but fell to a daily low at 7,756.62 during the last hour of trading but picked up to close marginally high.

The S&P SL20 index of more liquid stocks gained 1.86 percent or 55.73 points at 3,059.03.

The market turnover was 11.4 billion rupees with 78 stocks gaining and 138 falling.

The market reached 7,945.01 points on Monday closing just short of 8,000 points, in what technical analysts call a psychological resistant level.

The December quarter earnings season is just starting.

As the broader market fell, banks stocks gained as punter pounced on financial stocks.

Commercial Bank gained 7.50 rupees a share to close at 96.20 rupees a share arresting the ASPI fall and Sampath bank gained 15.25 rupees a share to close at 162.00 rupees.

“Pan Asia bankuwater ridenner gahuwar, (Pan Asia Bank was hit till it hurt)” one market analysts said in pithy Sinhalese.

Pan Asia Bank closed 24 percent higher at 18.60 rupees, up 3.60 rupees a share.

Hatton National Bank gained 6.75 rupees a share up by 6.03 percent to close at 118.75 rupees and DFCC bank gained 2.70 rupees a share to close at 70.60 rupees a share.

Sri Lanka’s stocks have soared amid low interest rates and money printing but many firms have also been reporting strong earnings after a slump in March due to lockdowns ended.

Banks have given moratoriums and their numbers are uncertain, but interest rates have fallen, which reduces deposit rates and also helps borrowers, analysts say.

Some banks have also brought sovereign bonds at steep discounts, which are also likely to bring gains.

However there are concerns over the balance of payments amid money printing. Sri Lanka’s economic momentum is usually arrested by currency collapses due to monetary instability coming from artificially low interest rates and liquidity injections.

On Tuesday some stocks which saw steep gains in recent weeks fell back amid profit taking.

LOLC Holdings which was a top gainer during the past few days slid 29.75 rupees a share closing at 235.50 rupees and LOLC finance a subsidiary of LOLC, fell 1.60 rupees to close at 7.80 rupees and Browns Investments fell 40 cents to close at 6.90 rupees a share.

Access Engineering Plc, which has been driven up partly on expectations of roads and expressway contracts gained 60 cents to close at 30.50 rupees a share while Expolanka Holdings fell 3.80 rupees to close at 50 rupees a share.

In the hotel sector Eden Hotel Lanka closed 90 cents down at 12.90 rupees a share, Sigiriya Village hotel closed 70 cents down at 34.30 rupees, Aitken Spence Hotel holdings fell 80 cents to close at 34.10 rupees whileJohn Keels Hotels closed 20 cents up at 11.20 rupees a share.

Sri Lanka Telecom closed 1.20 rupees down at 40.00 rupees and Melstacorp Plc closed 3.00 rupees down at 60.20 rupees. Distilleries Company fell 60 cents to close at 23.20 rupees, as its parent Melstacorp sold down part of its holding for the second day.

John Keells Holdings closed 1.00 rupee downat 160.25 rupees a share and Richard Pieris Company closed 20 cents down at 15.70 rupees.

Ceylon Tobacco Company fell14.50 rupees to close at 1,109.75 rupees and Ceylon Cold stores closed 1.50 rupees up at 709.00 rupees a share.

Hayleys Plc closed 75 cents down at 497.50 rupees while Hemas Holdings closed 60 cents down at 95.00 rupees.

Nestle Lanka closed 27.25 rupees down at 1,276.50 rupees while Dialog Axiata closed 10 cents up at 12.70 rupees.

Sri Lanka record a net foreign sales of 123 million rupees today.

The Bank industry was the most active, gained 7.5 percent and Capital Goods Industry which was also active fell 1.7 percent today. (Colombo/January 19/2021)

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Central banks expect to increase gold reserves after buying 1,037 tonnes in 2023: Survey

ECONOMYNEXT – About 29 percent of central banks in the world intended to increase their gold reserves in 2023, up from 24 percent in 2023 and just 8 percent in 2019, a survey by the World Gold Council showed.

“The planned purchases are chiefly motivated by a desire to rebalance to a more preferred strategic level of gold holdings, domestic gold production, and financial market concerns including higher crisis risks and rising inflation,” the WGC said.

About 81 percent of 70 central banks that responded to the survey expected global central bank holdings of gold to go up, from 71 percent in 2023.

While in prior years, gold’s “historical position” was the top reason for central banks to hold gold, this factor dropped significantly to number five this year.

This year, the top reason for central banks to hold gold is “long-term store of value / inflation hedge” (88%), followed by “performance during times of crisis” (82%), “effective portfolio diversifier” (75%) and “no default risk” (72%).

Concerns about sanctions were listed as by 23 percent of emerging market central banks (0 advanced).

De-dollarization as a reason to hold gold gained ground, but was not among the main reasons.

About 13 percent of emerging market central banks listed de-dollarization as one of the reasons to buy gold up from 11 percent last year and 6 advanced nations said the same from zero last year.

Around 49 percent of central banks expected gold reserves to be moderately lower five year from now in the 2024 survey, against 49 percent in 2023 and 38 percent in 2022.

About 13 percent of central banks surveyed said US dollar reserves would be significantly lower in the 2024 survey, up from 5 percent in 2023 and 4 percent in 2022. (Colombo/June18/2024)

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Sri Lanka rupee closes weaker at 304.75/305.40 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed weaker at 304.75/305.40 to the US dollar Tuesday, down from 304.15 to the US dollar Friday, dealer said, while some bond yields edged up.

Sri Lanka’s rupee has weakened amid unsterilized excess liquidity from earlier dollar purchases.

Excess liquidity fell from as high as 200 billion rupees, helped by some sales of maturing bills and also allowing some term contracts to run out.

However the central bank has started to inject liquidity again below its policy rate to suppress interest rates.

On Tuesday 30 billion rupees was printed overnight at an average yield of only 8.73 percent.

Separately another 25 billion rupees was printed till June 25 at 8.09 percent to 9.05 percent, which was still below overnight the policy rate of 9.5 percent.

Nobody has so far taken the central bank to court for printing money beyond overnight at rates lower than the overnight rate.

Sri Lanka operates an ad hoc exchange rate regime called ‘flexible exchange rate’ which triggers panic among market participants, as the central bank stays away when spikes in credit either creates import demand or unsterilized credit is used up.

“If large volumes of unsterilized liquidity is left, the exchange rate has to be closely defended to prevent speculation involving early covering of import bills and late selling of exports proceeds,” EN’s economic columnist Bellwether says.

“Just as an appreciating or stable exchange rate leads to late covering of import bills, a falling rates leads to immediate covering of import bills.

“Keeping exchange rates stable is a relatively simple exercise but it is difficult to do so if short term rates are also closely targeted with printed money, as liquidity runs out, as if the country had a free float and no reserve target.”

“When there is a large volume of excess liquidity remaining (except those voluntary deposited for long periods by risk averse banks) the the interest rates structure is under-stated compared to the reported reserves.

“Interest rates would be a little higher than seen in the market if the liquidity was mopped up and domestic credit and imports were blocked to prevent the reserves from being used up.”

In East Asia there is greater knowledge of central bank operational frameworks, though International Monetary Fund driven flawed doctrine are also threatening the monetary stability of those countries, critics say.


Vietnam selling SBV bills to stabilize the Dong, as Sri Lanka rupee also weakens

Sri Lanka’s rupee started to collapse steeply after the IMF’s Second Amendment in 1978 along with many other countries as flawed operational frameworks gained ground without a credible anchor.

A bond maturing on 15.12.2026 closed at 10.10/30 percent up from 10.05/30 percent Friday.

A bond maturing on 15.10.2027 closed at 10.60/57 flat from 10.60/80 percent.

A bond maturing on 01.07.2028 closed at 11.15/35 percent, up from 11.05/20 percent.

A bond maturing on 15.09.2029 closed at 11.80/90 percent unchanged.

A bond maturing on 15.10.2030 closed at 11.90/12.00 percent.

A maturing on 10.12.2031 closed at 11.95/12.10 percent.

A bond maturing on 01.10.2032 closed at down at 11.95/12.10 percent, down from 12.00/10 percent. (Colombo/Jun14/2024)

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Sri Lanka’s Ceylon Chamber links up with Gujarat Chamber

ECONOMYNEXT – The Ceylon Chamber of Commerce has signed an agreement with the Southern Gujarat Chamber of Commerce and Industry (SGCCI) to increase trade cooperation between India and Sri Lanka.

The MOU was signed by CCC CEO Buwanekabahu Perera, SGCCI President Ramesh Vaghasia, in the presence of Dr Valsan Vethody, Consul General for Sri Lanka in Mumbai, India.

“With the signing of the MoU, … the Ceylon Chamber of Commerce and SGCCI aim to facilitate trade between the two countries via initiatives such as trade fairs and delegations, business networking events, training programmes,” the Ceylon Chamber said in a statement.

“This partnership will open doors for Sri Lankan businesses to explore opportunities in Surat’s dynamic market and enable the sharing of expertise and resources between the two regions.”

Established in 1940, SGCCI engages with over 12,000 members and indirect ties with more than 2,00,000 members via 150 associations. It promotes trade, commerce, and industry in South Gujarat.

The region’s commercial and economic centre Surat has risen to prominence as the global epicenter for diamond cutting and as India’s textile hub, and is ranked the world’s 4th fastest growing city with a GDP growth rate of 11.5%

Surat’s economic landscape is vibrant and diverse. As India’s 8th largest and Gujarat’s 2nd largest city, it boasts the highest average annual household income in the country.

The nearby Hazira Industrial Area hosts major corporations like Reliance, ESSAR, SHELL, and L&T. (Colombo/Jun18/2024)

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