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Wednesday October 20th, 2021

Sri Lanka stocks jump after CB governor’s statement; Foreigners exit

ECONOMYNEXT – Sri Lanka stock index gained 3.69 percent on Monday (27), after the new central bank governor’s statement over the weekend pointed to some stable interest rates and exchange rates in the near future, brokers said.

Foreign investors, however, sold a net 722 million rupee worth of shares on Monday. The market has suffered a
net foreign outflow of over 43.2 billion rupees so far this year.

Reappointed central bank governor Nivard Cabraal during a weekend told a virtual forum that he will be more focus on growth and stability and though the policy rate hike was a bit late, now they are at a reasonable level. He also said the rupee has already over depreciated but likes to see the currency at the same level.

“Those statements somewhat helped the market. But more than that there was some speculation over ExpoLanka’s September quarter results. Some illiquid shares also pushed the index up,” a stockbroker said.

The day’s turnover hit a two-week high of 6.7 billion rupees and was above this year’s average daily
turnover of over 4 billion rupees.

The index closed 329.54 points up at 9,269.65 points. It remained on upward trend throughout the day
and hit the day’s highest of 9,305.83 in the last hour of trading.

The S&P SL20 index of more liquid stocks gained 2.04 percent or 68.31 points to close at 3,416.12.

Sri Lanka’s debt office is also having it;s first bond auction on Tuesday (28) without price controls and brokers said investors have some confidence that the rates will not surge sharply.

Last Wednesday, Sri Lanka’s Treasury bill yields rose between 30-38 basis points at a weekly auction
signalling a possible increase in the market interest rates after the new Central Bank Governor removed
ceiling 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.

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 gain was led by Commercial Leasing and Finance, Expolanka Holdings, and LOLC Holdings.
Commercial Leasing and Finance gained 43.35 percent to close at 29.10 rupees.

Expolanka Holdings, the market heavyweight which has a significant export component in its business,
gained 7.83 percent to close at a record 189.25 rupees a share.

LOLC Holdings rose 7.82 percent to close at 561.75 rupees a share.

The bourse saw 101 stocks gaining against 85 falling on Monday.

Brokers say the market could fall significantly if a market correction starts.


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