ECONOMYNEXT – Sri Lanka’s shares gained on Monday on the banking sector after interest had sparked in the largest counter after debt optimization assurances were prompted to investors, an analyst said.
The main All Share Price Index (ASPI) was up 1.09 percent or 96.22 points to 8,926.58, while the most liquid index, S&P SL20, was up 1.36 percent or 34.37 points to 2,593.44.
“The trend should pick up in the days to come,” an analyst said.
The market had been on continuous muted sentiments due to fears of domestic debt restructuring, poor earnings performance, and comments by the President on the potential closure of the stock market.
Sri Lanka is confident of meeting its debt resturing objectives and no longer intends to borrow for infrastructure projects that don’t promise returns, Foreign Minister Ali Sabry said, adding that the country has learnt its lesson.
“We have made a lot of progress. Prior actions except some minor ones were taken before the extended fund facility (EFF) was approved. We have introduced cost-reflective pricing in many areas. State-owned enterprise (SOE) reforms are on the cards. Tax reforms have come into play. There is a sense of stability in the country. We have eliminated all sorts of queues and shortages,” he said.
The minister was emphatic that any debt restructuring effort should feature equal treatment for all of Sri Lanka’s creditors. Whether it’s debt relief or some other form of restructuring, the same standard must apply universally, he said. Thus far that is the latest insight on debt restructuring provided from the government’s end.
Sri Lanka’s banks have sought clarity on a proposed domestic debt restructure, questioning whether there is a non-voluntary element in the plan, and have also called for transparent discussions with all banks.
Sri Lanka’s Central Bank and Treasury officials have said that there will be voluntary debt ‘optimization’ for domestic debt holders.
Sri Lanka’s banks said assurances has been received that the stability of the sector cannot be risked in a planned domestic debt overhaul, to make the defaulted debt sustainable under a program with the International Monetary Fund.
”[T]he Central Bank of Sri Lanka (CBSL) has assured the banks that the regulatory stance in the on-going Domestic Debt Optimization (DDO) discussions with the diverse stakeholders will be that, the banking sector stability cannot be put at risk,” Sri Lanka Bank’s Association said in a statement.
Top gainers were Sampath Bank, Commercial Bank and Hatton National Bank. The banking sector was responsible for a big chunk of the revenue earned, out of 855 million rupees the banking sector contributed 239 million rupees.
“There has been some renewed interest for the banking sector after the press release regarding the assurances on debt optimization,” an analyst said.