CSE hits 5-week closing low on fuel price hike, foreign outflows

Reuters: Sri Lankan shares ended at a near five-week low yesterday, led by industrial shares such as John Keells Holdings, while foreign outflows and the recent fuel price hike weighed on sentiment, stockbrokers said.

State-run fuel retailer Ceylon Petroleum Corp (CPC) raised retail prices for gasoline and diesel last Thursday (10 May) midnight in response to the hike in oil prices, while Lanka IOC, a subsidiary of Indian Oil Corp, increased fuel rates the same day.

“The fuel price hike hit overall market sentiment. The increase could hit cost of production and services in almost all the companies. So, investors expect lower profits,” said First Capital Equities CEO Jaliya Wijeratne.

The Colombo stock index fell for a sixth straight session and ended 0.52% weaker at 6,444.96, its lowest close since 10 April. The index lost 0.4% last week, in its third straight weekly decline.

The day’s foreign selling accounted for 80% of the turnover, which stood at Rs. 924.4 million ($5.86 million), less than this year’s daily average of Rs. 1.03 billion.

Foreign investors net sold Rs. 333.2 million worth of equities yesterday, extending net foreign outflow to Rs. 668.5 million worth of equities so far this year.

John Keells Holdings, whose transport business is seen to be affected due to the price hike, ended 1.2% down, while top mobile phone operator Dialog Axiata closed 1.4% lower despite posting a rise of 78.6% in first-quarter net profit, and Lanka IOC ended down 4.5%.

Garment exporter Teejay Lanka PLC accounted for 65% of the day’s turnover.

The market shrugged off the Central Bank’s policy decision on Friday (11 May) as it was widely expected, brokers said.

The Central Bank kept its key policy rates steady, a little more than a month after it unexpectedly cut the main lending rate, forecasting a modest recovery in the economy this year after growth slumped to a 16-year low in 2017.

Analysts said the depreciation of the rupee also weighed on investor sentiment as it is likely to hit profits of some listed firms that rely heavily on imports.

The rupee hit a fresh low of 158.00 per dollar yesterday on importer demand for the US currency.

Analysts said concerns over political instability following President Maithripala Sirisena’s decision to suspend the Parliament last month after 16 legislators from his ruling coalition defected weighed on sentiment, as well.

Sirisena, last week, urged his own Coalition Government and the Opposition to end a power struggle in order to achieve ambitious goals, including anti-corruption measures.