ECONOMYNEXT – Sri Lanka stock index fell 0.36 percent on Tuesday (21) in thin volumes of trade as investors adopted a wait and see approach and waited for central bank directions on the interest rate and rupee exchange rate under the newly appointed central bank governor, brokers said.
The index closed 31.56 points down at 8,770.39 points. ASPI remained volatile throughout the day and hit the day’s lowest of 8,727.75 after noon, however the index recovered slightly to settle around 8.770.39.
The S& P SL20 index of more liquid stocks fell 0.75 percent or 25.08 points to close at 3,266.79.
The market turnover for the day was 1.7 billion rupees, below this year’s average daily turnover of over 4 billion rupees.
“The market was extremely slow with lower buying support due to a lot of uncertainty,” a Colombo-based market analyst said.
“The economic uncertainty and Sri Lanka’s indecisiveness on seeking IMF assistance to face debt issues are some of the factors that are playing in the investors mind while tomorrow’s bills auction also have created a wait and see attitude.”
Sri Lanka’s debt office is offering 39.5 billion rupees in a weekly auction to be held on Wednesday (Sept 22). It is the first auction after the central bank lifted yield controls abolishing a 12-month de facto policy rate through which large volumes of liquidity was injected, leading to forex shortages and reserves losses.
The move will allow the rates to rise if the central bank stops excess printing money while brokers say the move could see investors shifting their funds from equity to fixed assets slowly.
Foreign investors sold a net 1 million rupee worth of shares on Tuesday. The market has suffered a net foreign outflow of over 42.35 billion rupees so far this year.
The country’s risky assets have unusually gained since mid last year 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.
Soon after assuming duty, Central Bank Governor Cabraal said he wanted fiscal discipline and to give directions to the market. Analysts expect him to deal with the forex concerns that had become a key risk in the market.
Importers have complained that they are compelled to pay nearly 15 percent more than the central bank’s official rate as state banks do not have adequate dollars.
Lower dollar inflows due to lower revenue from pandemic-hit tourism and declining remittances amid depleted foreign exchange reserves have put pressure on the exchange rate, brokers say.
The fall was led by LOLC holdings, Expolanka and Browns Investment.
LOLC Holdings down 2.56 percent to close at 504.50 rupees a share.
Browns Investment, a subsidiary of LOLC Holdings down 2.15 percent to close at 9.10 rupees a share.
Expolanka Holdings, the market heavyweight which has a significant export component in its business slipped 1.51 percent to close at 163.50 rupees a share.
The bourse saw 78 stocks gaining against 108 falling on Tuesday.
Brokers say the market could fall significantly if a market correction starts. (Colombo/September21/2021)