ECONOMYNEXT – Sri Lanka stock index gained 0.48 percent on Thursday (23) in thin trade, as investors took a wait and see approach, a day after yields in treasury bills rose ahead of central bank directions on the interest rate and rupee exchange rate, brokers said.
The index closed 42.30 points up at 8,830.35 points. It remained volatile throughout the day and hit the day’s highest of 8,779.47 in the first hour of trading, however it slipped in a zig-ag move before the close.
The S& P SL20 index of more liquid stocks gained 1.03 percent or 33.94 points to close at 3,317.44.
“There was a cautious approach across the board. The market is concerned over a possible gradual increase in interest rate after the central bank removed the cap on the t-bill yield,” a stockbroker said, asking not to be named.
Sri Lanka’s treasury bill yields rose between 30-38 basis points at a weekly auction on Wednesday, signaling possible increase in the market interest rates.
The move could help the central bank to print less money while brokers say the rise in the interest rates could see investors shifting their funds from equity to fixed assets slowly.
The country’s risky assets have unusually gained since mid-2020 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.
The market turnover for the day was 2.02 billion rupees, around half of this year’s average daily turnover of over 4 billion rupees.
Foreign investors sold a net 32.1 million rupee worth of shares on Thursday. The market has suffered a net foreign outflow of over 42.46 billion rupees so far this year.
The gain was led by Expolanka Holdings, LOLC Holdings and John Keells Holdings.
Expolanka Holdings, the market heavyweight which has a significant export component in its business, gained 2.85 percent to close at 171.50 rupees a share.
John Keells Holdings gained 2.09 percent to close at 134.25 rupees, while LOLC Holdings rose 0.89 percent to close at 510.75 rupees a share.
The bourse saw 106 stocks gaining against 82 falling on Thursday.
Brokers say the market could fall significantly if a market correction starts. (Colombo/September23/2021)