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Wednesday July 6th, 2022

Sri Lanka stocks edge up in thin trade; investors see slowing trend to continue

ECONOMYNEXT – Sri Lanka stocks closed marginally higher on Wednesday (22), gaining for a second straight session but the trading volume slumped over 16 months low as investors awaited cues for positive sentiment amid concerns over political and economic crisis with brokers expecting the slowing trend to continue.

Prime Minister Ranil Wickremesinghe during the market hours said Sri Lanka aims to reach a staff-level agreement with the International Monetary Fund (IMF) and also have a framework in place for debt restructuring by the end of July.

The main All Share Price Index (ASPI) closed 0.13 or 9.87 points higher at 7,512.15.

“The selling pressure and the negativity is coming back to the market again,” a top market analyst said.

“We saw this yesterday too but the market managed to stay up but today the sentiments are weak as the market environment is not conducive for investment at the moment.’

On Tuesday, the market reversed from its near six-session dip on the news of the Prime Minister meeting with the IMF delegation in Colombo.

The turnover was 690.5 million rupees, its lowest since March 10 and less than a fifth of this year’s daily average turnover of 3.56 billion rupees.

“This sentiment will continue because an ideal situation for investors to come back to the market is when the taxes normalise and interest rates are lowered so for another 6-9 months it’s going to be a slow business environment therefore the expected returns on equity is lower too,” he said.”We feel that the demand will reduce for equity and this is just the start, it will further accelerate whether there is an IMF deal or not.”

A 10-member IMF team arrived in Sri Lanka and began discussions on policy corrections with Prime Minister Ranil Wickremesinghe on Monday

However, Sri Lanka must show progress on debt restructuring before IMF lends any money.

Market analysts have said investors were heavily feeling the pinch of economic crisis as the country’s fuel bunkers have dried out the island nation was frantically looking for dollars to purchase fuel.

The public sector and the schools have moved online for two weeks on the government’s advice to reduce transport and save fuel.

Though a new prime minister and a new cabinet have been appointed, analysts see little progress on both the economical and political fronts. The country is struggling to ensure a continuous supply of fuel due to a shortage of US dollars.

The more liquid S&P SL20 index gained 0.38% or 9.24 points to 2,409.81

Foreign investors sold a net of 192,000 rupees worth of shares on Wednesday. The market has witnessed a total foreign outflow of more than 1 billion rupees so far this year.

The market has so far lost 7.2% in June after gaining 6% in May. It lost 23% in April followed by a 14.5% fall in March.

The market has lost 38.5% so far this year after being one of the world’s best stock markets with an 80% return last year when large volumes of money were printed.

Sri Lanka’s sovereign debt default has already led the country to be rated with restricted/selective default rating by rating agencies, which has weighed on investor sentiment.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

All Share Price Index was mainly pushed up by John Keells Holdings, which gained 2.7% to 125.0 rupees a share, a day after it announced a 75 million US dollar borrowing from a Canadian firm via debentures.

Expolanka was up 2.4% to 174.3 rupees a share, while Central Finance Company gained 6% to 60 rupees a share. (Colombo/June 22/2022)

Comments (1)

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  1. sacre blieu says:

    Even the recent shocking market manipulation was not criticized or condemned enough giving the appearance that it was a necessary evil to boost the market. Our market has not been a forum to reflect as a thermometer for investment. How much more will be taken for suckers.

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Comments (1)

Your email address will not be published.

  1. sacre blieu says:

    Even the recent shocking market manipulation was not criticized or condemned enough giving the appearance that it was a necessary evil to boost the market. Our market has not been a forum to reflect as a thermometer for investment. How much more will be taken for suckers.