Bourse gains on banks, diversified stocks

Reuters: The rupee closed steady on Wednesday in dull trade, as demand for dollars from importers and banks offset conversion of the US currency by exporters, dealers said.

The spot rupee, which traded at 153.80 per dollar during the day, ended at 153.70/80 per dollar, unchanged from Tuesday’s close.

The currency fell 2.5% last year and dropped 3.9% in 2016.

“It was a dull day. There were not many importers in the market and the exporters are also reluctant to come as they are awaiting the central bank’s directive on derivatives,” said a currency dealer.

The Central Bank, while announcing its key economic policies for this year, said the conduct of monetary policy is dependent on an effective and prudent exchange rate policy.

“It has allowed more flexibility in determining the exchange rate based on the market conditions and has intervened only to smoothen volatility and to build up reserves,” the central bank said in its policy statement.

“It is noteworthy that there has been a build-up of non-debt creating international reserves during 2017, with minimal impact on the exchange rate.”

It also said that foreign exchange intervention policies will be adopted consistent with a flexible exchange rate regime and supportive of improving foreign exchange market functionality, and maintaining a competitive exchange rate will be an important objective.

Dealers said the import pressure will be seen until the Central Bank sorts out the new derivatives regulations, which has slowed forward trading in the currency.Reuters: Shares rose for an eighth straight session to hit a six-week closing high on Wednesday, as investors picked up banks and diversified shares, with sentiment expected to remain positive after the central bank kept key policy rates unchanged last week.

The Colombo Stock Index ended 0.81% firmer at 6,463.50, its highest closing level since 22 November.

Shares in conglomerate John Keells Holdings Plc gained 3.7%, while Lanka ORIX leasing Company Plc rose 4.8%. “The positive trend which started last few days of 2017 is continuing, with investors continuing to buy value stocks,” said Dimantha Mathew, head of research at First Capital Holdings.

“Declining market interest rates is a big positive factor.”

Turnover stood at Rs. 638.3 million ($ 4.15 million), less than last year’s daily average of Rs. 915.3 million.

Foreign investors net bought shares worth Rs. 190.95 million on Wednesday. Foreign investors net bought Rs. 18.5 billion worth equities in 2017, and Rs. 633.5 million worth of stocks in 2016. The index has risen 2.26% in 2017, posting the first annual increase in three years, after falling 9.7% in 2016. Since March 2017, Treasury bill rates have fallen between 188 and 216 basis points though end-December, mainly driven by foreign investors buying treasury bonds, resulting in declining market interest rates. Analysts also said the 2018 economic growth trajectory would help boost market sentiment. Sri Lanka’s economic growth in 2018 is forecast at 5-5.5%, bouncing back from an anticipated four-year low of less than 4% last year, Central Bank Governor Indrajit Coomaraswamy said on Wednesday.

Rupee ends steady in dull trade