ECONOMYNEXT – Sri Lanka‘s shares closed lower on Monday due to profit taking after market gained for six consecutive sessions, an analyst said.
“The positive week in the market stimulated some selling interest and profit taking,” an analyst said.
The main All Share Price Index was down 0.73 percent or 67.32 points to 9,181.22, the lowest since June 14, while the most liquid index S&P SL20 was down 1.14 percent or 29.95 points to 2,608.87.
Since Sri Lanka’s domestic debt optimisation is not yet finalised, premature speculation could undermine market confidence, State Minister of Finance Shehan Semasinghe said.
“The process of domestic debt optimization is not finalized yet. The government is fully committed to ensure the stability of the banking and financial sector. Recognizing the sensitivity, premature speculations without a conclusion could potentially undermine market confidence,” Semasinghe tweeted Sunday June 18 morning.
“Therefore it is of importance that we speak on this matter responsibly and diligently. We have made progress in engaging with our bilateral creditors on debt restructuring efforts. We are optimistic that the engagements will lead to a favorable agreement to achieve stability,” he said.
Central Bank Governor Nandalal Weerasinghe said early May that public bank deposits and stability of the banking system will be safeguarded in any reorganization of domestic debt.
“There is speculation about the stability of public deposits and banking system stability,” Weerasinghe told a public forum.
Sri Lanka’s commercial banks have called an effective insolvency regime and discussions through the central bank before changing any existing debt recovery laws, as bad loans in the banking system go up.
Sri Lanka Banks’ Association (SLBA) representing all commercial banks said it is urging “policymakers to engage with commercial banks via the Central Bank of Sri Lanka (CBSL) to ensure a comprehensive and well-coordinated approach to alleviating the stress felt by the industrialists in loan default.”
The market gained over the past sessions on lowered policy rates and low inflation stimulating buying interest and driving the sentiment up.
“Banking counters have seen some attraction on the buying front due to decreased fears in domestic debt restructuring (DDR),” an analyst said. The fears on DDR have decreased due to policy rate cuts and lowered inflation.
The central bank cut the key policy rates by 250 basis points to spur faltering economic growth as inflation was decelerating faster than projected.
Sri Lanka’s inflation in the 12 months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier, according to a revised Colombo Consumer Price Index calculated by the state statistics office.
Sri Lanka needs more revenues and restructuring debt by September was essential for debt to be made sustainable an International Monetary Fund mission said after a visit to the island.
Sri Lanka’s debt restructure will take place based on the existing debt sustainability analysis, using the original projections made by the International Monetary Fund, Central Bank Governor Nandalal Weerasinghe said, despite economic indicators improving faster than expected.
The market generated a net foreign inflow of 175 million rupees, so far the total outflow for the year is 969 million rupees.
Top losers during trade were Sampath Bank, Commercial Bank and Cargills. Banks were among the top losers due to the constant gains over the past few sessions, an analyst said.
The market generated revenue of 579 million rupees, while the daily turnover average was 1 billion rupees, this is the lowest the revenue has been since June 07. (Colombo/June19/2023)