Shares hit 15-month closing low on foreign selling

Reuters: Shares extended losses yesterday to hit their lowest close in more than 15 months as continued foreign selling in blue-chip stocks dampened sentiment.

Concerns about lower economic growth also dented sentiment, analysts said.

The Colombo stock index declined for a 17th session in 19 and closed 0.61% weaker at 6,044.03, its lowest close since March 30, 2017. On Monday, the index fell the most in intraday trade in nearly 28 months.

Foreign investors sold for the 10th consecutive session, extending the foreign outflow to Rs. 1.1 billion ($ 6.94 million) worth of equities.

Foreign selling has continued, and this is mainly due to the foreign investors’ exiting from emerging markets,” said First Capital Holdings Head of Research Dimantha Mathew.

Foreign investors net sold equities worth Rs. 82.1 million, extending the year-to-date foreign outflows to Rs. 1.82 billion.

Turnover was Rs. 261.6 million, less than a third of this year’s daily average of Rs. 926.2 million.

Top conglomerate John Keells Holdings closed 1.3% lower, Distillers Co. of Sri Lanka PLC ended 1.5% lower, leading fixed line telephone operator Sri Lanka Telecom PLC ended down 3.2%, and Lanka ORIX Leasing Co. PLC closed 3.1% lower.

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 suffered 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 yesterday that 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.