Stocks, rupee fall as sectarian violence pushes investors away

Reuters: Sri Lankan shares slumped 1.6% on Tuesday, extending their falls into a ninth session and closing at their lowest in more than six-and-a-half years, while the rupee slipped for a fourth day in dull trade, as sectarian violence drove off investors. 

One person was killed in Sri Lanka on Monday as police fired tear gas at mobs attacking mosques and Muslim-owned shops and imposed a curfew after the worst outbreak of sectarian violence since the Easter bombings by Islamist militants. 

Sri Lankan police arrested 23 people on Tuesday in connection with a spate of attacks on Muslim-owned homes and shops in apparent reprisal for the Easter bombings that killed more than 250 people. 

Sri Lanka’s economic growth is expected to slump to its lowest in nearly two decades this year, a Reuters poll showed. Tourism, foreign investment and overall business activity have all dropped after the bombings. 

The benchmark stock index ended 1.57% weaker on Tuesday at 5,223.69, its lowest close since 30 August 2012. 

Turnover was Rs. 574.6 million ($3.25 million), more than this year’s daily average of around Rs. 557.8 million. Last year’s daily average was Rs. 834 million. 

Foreign investors bought a net Rs. 190.6 million worth of shares on Tuesday, but they have been net sellers of Rs. 4.2 billion worth of equities so far this year. 

The rupee closed weaker on dollar demand from banks. 

The rupee dropped 0.1% to close at 176.75/90 per dollar, compared with Monday’s close of 176.60/70, market sources said. 

Analysts expect the currency to weaken further as money flows out of stocks and government securities. The rupee gained 0.6% last week and is up 3.4% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

Foreign investors sold a net Rs. 10.8 billion worth of Government securities in the week ended 8 May, extending net foreign outflow to Rs. 20.8 billion so far this year, Central Bank data showed.