Shares fall to over 5-year closing low; rupee gains

Reuters: Sri Lankan shares fell on Wednesday to a more than five-year closing low in thin trade, a day after the country proposed higher spending in its 2019 Budget and set an ambitious target to cut fiscal deficit, analysts said. 

The rupee closed firmer on inward remittances and dollar selling by exporters. 

Sri Lankan Finance Minister Mangala Samaraweera on Tuesday presented the 2019 Budget, which raises spending while setting an ambitious goal to reduce the country’s large fiscal deficit. The IMF last week agreed to extend Sri Lanka’s $1.5 billion loan program by one year and has reached staff level agreement to disburse the sixth tranche of the loan. The Colombo Stock Exchange index closed 0.33% weaker at 5,751.60, its lowest close since Nov. 27, 2013, as investors sold large caps. The benchmark stock index fell 1.43% last week. It declined 2.9% in February, its second straight monthly fall. Turnover was Rs. 385.1 million ($2.16 million), less than half of last year’s daily average of Rs. 834 million. 

Foreign investors sold a net Rs. 317.8 million worth of shares on Wednesday, extending the year-to-date net foreign outflow to Rs. 5.8 billion worth of equities. 

The rupee ended firmer at 178.40/60 per dollar, compared with Tuesday’s close of 179.00/25. 

Foreign investors exited from government securities for the second straight week in the week ended 27 February, with net sales of Rs. 3.4 billion, the Central Bank’s latest data showed. 

The rupee has climbed 2% so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a $1 billion sovereign bond in mid-January. 

Worries over heavy debt repayment after the 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country struggled to repay its foreign loans. 

The rupee dropped 16% in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows.