Sri Lankan shares edge up; rising interest rates weigh

COLOMBO, June 7 (Reuters) – Sri Lankan shares ended slightly firmer on Tuesday, rising for the first time in seven sessions on positive sentiment after the IMF loan approval, but concerns over rising interest rates and foreign outflows dented sentiment.

Turnover was low at Rs596.6 million ($4.10 million), well below this year’s daily average of around Rs786.3 million.

The International Monetary Fund’s (IMF) executive board approved a three-year $1.5 billion loan to support Sri Lanka’s economic reform agenda, the global lender said on Saturday.

The benchmark Colombo stock index ended 0.08 percent up at 6,524. It declined 0.8 percent last week, losing for the third straight week after gaining six consecutive weeks.

"We believe the market will start moving up. But it will take time since net foreign numbers are not that good," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Investors are still cautious about interest rates."

Treasury bill yields rose between 4 and 35 basis points to near 3-year highs in the last two weekly auctions through Wednesday despite the Central Bank leaving key policy rates steady for a third straight month on May 20.

Investors are concerned about foreign outflows, with overseas investors offloading a net Rs25.5 million worth of shares on Tuesday, extending the year-to-date net foreign outflow to Rs5.66 billion.

Stockbrokers said a rise in interest rates could be detrimental to risky assets if they jumped beyond 12 percent. The average prime lending rate (AWPR) edged up 8 basis points to 10.23 percent in the week ended June 3.

Shares of Bukit Darah Plc jumped 3.98 percent, while shares of John Keells Holding Plc rose 0.19 percent, pushing up the overall index.

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Shares in biggest listed lender Commercial Bank of Ceylon Plc rose 0.55 percent.

 

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