CSE gains most in over 7 months on bargain hunting

Reuters: Shares rose 1.2% yesterday, the most in seven-and-a-half months, as investors bought into blue chips such as Ceylon Tobacco Co PLC and John Keells Holdings PLC after three straight sessions of sharp fall.

However, continued foreign investor selling and concerns about lower economic growth limited the gains, analysts said.

The Colombo stock index ended 1.22% higher at 6,117.86, in its sharpest daily gain since 21 November, after declining 1.5% earlier in the session. It hit its lowest close since 30March 2017 on Wednesday, and has declined for a 17th session in 20 through yesterday.

"Market bounced backed as stocks were attractive and investors must have seen the value in those blue-chip counters," said Softlogic Stockbrokers Deputy Chief Executive Hussain Gani.

"It looks like 6,100 is the resistance level and we might see market holding on at these levels."

Meanwhile, the Central Bank is likely to keep key interest rates unchanged at its policy review today, but a rate hike cannot be ruled out as the authorities struggle to ease depreciation pressure on the rupee.

Foreign investors sold Sri Lankan equities for an 11th consecutive session, extending the foreign outflow to Rs. 1.3 billion ($8.19 million).

They net sold equities worth Rs. 163.3 million, extending the year-to-date foreign outflows to Rs. 2.07 billion.

Turnover was Rs. 512.2 million, less than this year's daily average of Rs. 922.8 million.

John Keells closed 1.5% higher, Ceylon Tobacco rose 1.2%, Distillers Co of Sri Lanka PLC ended 10.4% firmer, and leading fixed line telephone operator Sri Lanka Telecom PLC gained 3.8%.

Investors are waiting for some positive news both on the economic and political fronts, said analysts, adding that the government's policy implementation had been sluggish since both main parties in the ruling coalition lost local polls in February.

Finance Minister Mangala Samaraweera said last month that the economy was likely to grow about 4.5% this year, below a Central Bank estimate of 5%.

The International Monetary Fund (IMF) said on 20 June that Sri Lanka's economy remained vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Ratings agency Moody's said last week a strengthening dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation.

Moody's said a strong dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey and Zambia.