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Sunday June 26th, 2022

Sri Lankan shares at over-5-week low on political woes, foreign selling

COLOMBO, June 3 (Reuters) – Sri Lankan shares ended at their lowest in over five weeks on Wednesday led by financials as concerns over political uncertainty before a parliament election dented sentiment, while foreign investors exited from risky assets.

The main stock index fell 0.64 percent to close at 7,149.46, its lowest finish since April 28. The fall, for the third straight session, was the worst single-day loss since March 30.

"Mainly it’s the political uncertainty," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

"Foreign selling was also seen. With the expected U.S. interest rate hike foreigners are expected to move funds out to the U.S."

Foreign investors were net sellers of 72.3 million rupees ($539,955.19) worth of shares on Wednesday, extending the net foreign selling in the last six sessions to 1.53 billion rupees. The bourse, however, has seen net inflows of 4.41 billion rupees in equities so far this year.

Despite political uncertainty, stockbrokers said better corporate earnings would help the market gain in the future despite the parliament election this year.

Turnover was 958 million rupees, below this year’s daily average of about 1.13 billion rupees.

Political uncertainty due to the Ranil Wickremesinghe-led government not having a majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

The index has gained 3.6 percent since the rate cut.

Shares in Sri Lanka Telecom Plc fell 1.00 percent while Lanka ORIX leasing Company Plc fell 3.7 percent, dragging the overall index.

Biggest listed lender Commercial Bank of Ceylon Plc fell 1.47 percent.

President Maithripala Sirisena’s government has said it would dissolve parliament once some crucial reform bills are passed. But it has not scheduled a date for the election.

Analysts say investors are hoping for a stable government after the election coupled with strong economic measures would boost confidence.

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