Bourse at near 3-year closing high on low rates

Thursday, 7 August 2014 00:49 - - {{hitsCtrl.values.hits}}

Reuters: Stocks touched a near three-year closing high on Wednesday led by banks on hopes the ongoing financial sector consolidation would help boost future earnings amid low interest rates; continued buying by foreign investors also helped sentiment. The main stock index ended 0.26%, or 17.84 points, firmer at 6,833.26, its highest close since 16 September 2011. It rose 6.82% in July and has been up 15.57% so far in the year. “Retail interest was mainly in the financial sector with mergers and acquisitions taking place due to the financial sector consolidation,” said Dimantha Mathew, research manager at First Capital Equities Ltd. “There is an increasing interest on the demand side (for stocks) simply because people are searching for avenues to invest with interest rates coming down.” Yields in treasury bills fell 8-13 basis points at a weekly auction on Wednesday with the one-year T-bill yield falling below the Central Bank’s repurchase rate or standing deposit facility rate. Hopes over strong earnings, declining interest rates and continued buying by foreign investors have helped boost interest in risky assets in the $22 billion-worth stock market. Ceylinco Insurance Plc rose 1.54% to Rs. 1,360.70 and Union Assurance Plc rose 10.32% to Rs. 174.20. Shares in the biggest listed lender Commercial Bank of Ceylon Plc rose 0.64% to Rs. 142.40. Turnover was Rs. 1.39 billion ($ 10.68 million), more than this year’s daily average of about Rs. 1.01 billion. Foreign investors bought a net Rs. 223.3 million worth of shares on Wednesday, extending the year-to-date net foreign inflow to Rs. 11.26 billion. The index has been in the overbought region since 3 July, as local investors moved funds from fixed income to riskier assets because of low interest rates and foreign buying.Lower interest rates have prompted local investors to buy shares and move away from unattractive fixed assets.

Rupee ends firmer; State banks curb gains

Reuters: The Sri ended firmer on Wednesday on inflows from exporter dollar sales and inward remittances, while two State banks bought dollars at a lower level, dealers said. The rupee ended at 130.19/21 per dollar, firmer from Tuesday’s close of 130.21/24. “There are regular inflows. State banks lowered the buying rate by two cents to 130.19 and there is not much demand from others. The State banks are the buyers and directing the market,” said a currency dealer. Dealers said dollar buying by the two State banks, through which the Central Bank intervenes in the market, prevented sharp gains in the local currency.Two Central Bank officials on Wednesday told Reuters that the monetary authority bought $218 million from the market on Tuesday and over $1 billion this year through Tuesday. Dealers said the currency would be under upward pressure in the absence of strong growth in private credit and imports. The Central Bank’s dollar purchases from the market to support exporters have increased rupee liquidity and sent yields on government securities lower amid lacklustre demand for private credit and imports, they said. A Central Bank official said last month the rupee would have risen to 125 per dollar had the Central Bank not intervened. The IMF last week urged Sri Lanka to limit its intervention in the foreign exchange market, a week after Finance Secretary P.B. Jayasundera said Sri Lanka was building up its foreign exchange reserves while keeping the rupee stable with the country seeing more inflows.