Sri Lankan shares close lower for 3rd day on firms’ ratings downgrade

COLOMBO, March 2 (Reuters) – Sri Lankan shares fell for a third straight session on Wednesday as a downgrade by Fitch Ratings of some companies that hold dollar bonds hit investor sentiment, traders said, days after the ratings agency downgraded the country’s sovereign rating.

Fitch downgraded the ratings of listed firms such as Sri Lanka Telecom Plc, DFCC Bank Plc, and People’s Leasing and Finance Plc, while state-owned Bank of Ceylon, National Savings Bank, Sri Lanka Airlines and Sri Lanka Insurance also were brought down by a notch.

The action followed Fitch’s downgrade of Sri Lanka’s sovereign rating to B-plus from BB-minus on Monday citing increased refinancing risks, significant debt maturities, and weaker public finances.

"The downgrading of institutions which hold dollar bonds are more in line with the sovereign ratings revision," said Shiran Fernando, an analyst at Colombo-based Frontier Research.

"This means foreign investor confidence will be reduced."

Sri Lanka’s benchmark share index closed 0.57 percent lower, or down 34.99 points, at 6,078.41, the lowest close since April 10, 2014.

The index remained in oversold territory for the seventh straight session, with the 14-day relative strength index at 19.741 on Wednesday, compared with Tuesday’s 21.663, Thomson Reuters data showed.

A level between 70 and 30 indicates the market is neutral.

Yields on treasury bills rose by 42-54 basis points at a weekly auction on Wednesday to a more than two-year high.

Yields on t-bills have risen after the central bank increased key policy rates by 50 basis points last month.

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Turnover touched 1.35 billion rupees ($9.34 million) on Wednesday, the highest since Feb. 19 and well above this year’s daily average of 721.5 million rupees.

Foreign investors were net buyers for the fourth straight session, purchasing 114.6 million rupees worth of shares on Wednesday.

Shares in conglomerate John Keells Holdings Plc fell 1.65 percent while Carson Cumberbatch Plc fell 4.54 percent and Distilleries Company of Sri Lanka Plc ended 2.27 percent weaker.
 

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