ECONOMYNEXT – Sri Lanka stocks end five-day rally as banking sector pushes market lower on fear of domestic debt restructuring, following the IMF’s approval for the extended loan facility, brokers said.
“Market continued to dip, mainly on banking counters as the International Monetary Fund approval has triggered concerns over domestic debt restructuring” Ranjan Ranatunga of First Capital Holdings said.
The main All Share Price Index (ASPI) closed up 0.98 percent or 95.53 points to 9,604.43, the lowest in four days.
A report from IMF on Tuesday said, that Sri Lanka is looking at options to re-structure domestic debt, or local law local currency debt (LLLC), without harming the banking sector.
Sri Lanka has to re-structure debt to meet a ceiling on debt-rollovers and new deficits called the gross financing need from 2027, which has been set at 13 percent of GDP (from 30-pct in 2022).
Meanwhile the EFF-supported program aims to restore Sri Lanka’s macroeconomic stability and debt sustainability, mitigate the economic impact on the poor and vulnerable, safeguard financial sector stability, and strengthen governance and growth potential.
The Executive Board’s decision will enable an immediate disbursement equivalent to SDR 254 million (about US$333 million) and catalyze financial support from other development partners.
“The market has fell 500 points since September 01, which can be a partial reason as to why the market may have been on muted sentiments and on profit taking” Ranatunga said.
The market saw a net foreign inflow of 22 million rupees and the total offshore inflows recorded so far in 2023 to 3.6 billion rupees.
The most liquid index, S&P SL20, closed 1.78 percent, or 50.90 points, down at 2,800.75
The market saw a turnover of 1.4 billion rupees on Tuesday, below this year’s daily average of 1.8 billion rupees.
The market will witness dull moments and major picks up during this year as it is expected to be a period of recovery, mixed with reducing inflationary pressures, potential rate cuts and balance of payment stability, which may eventually take the index up to 12,000 psychological point, Ranatunga said.
The top losers were Sampath Bank, Expolanka and Vallible One. (Colombo/ March21/2023)