Bourse falls on technical correction, outflows

Thursday, 19 June 2014 00:00 - - {{hitsCtrl.values.hits}}

REUTERS: Shares fell on Wednesday on a technical correction and foreign outflows, with investors selling blue-chips such as John Keells Holdings PLC after the central bank held the key policy rates steady, stockbrokers said. Investors were expecting a rate cut at the Central Bank’s policy review, said analysts. The main stock index fell 0.42% or 26.80 points to 6,317.61, edging down from its highest close since 6 June, 2013. Before the market opened on Wednesday the central bank kept policy rates steady at multi-year lows for a fifth straight month as it expects lending to pick up in the second half of the year. “It was a long awaited technical correction,” Hussain Gani, Deputy CEO at Softlogic Securities said. Other analysts said investors were expecting a rate cut, but the Central Bank’s decision dented sentiment. The bourse saw a net foreign selling on Wednesday for the first time in 13 sessions. Foreign investors sold Rs. 41.5 million ($ 318,700) worth of shares on Wednesday. But they have been net buyers of Rs. 5.81 billion so far this year. The market has been on a rising trend since late February due to the continued foreign buying and expectation of an interest rate cut. Dealers said investors were waiting to see the impact of weekend violence that killed at least three people and left 75 people seriously injured on the market and tourism sector. The Central Bank has reduced its key policy rates to multi-year lows, but has not yet seen any improvement in credit and import growth. April private sector credit growth contracted 3.3% year-on-year, its worst performance since January 2010. Turnover was Rs. 713.9 million, less than this year’s daily average of Rs. 1.01 billion. Shares of Conglomerate John Keells fell 2.36% to Rs. 227.10, while Nestle Lanka PLC declined 1.35% to Rs. 1,923.

Rupee ends lower on importer dollar demand

Reuters: The rupee fell for the first time in 10 sessions on Wednesday, slipping from the previous session’s near-one-year high, on dollar demand from importers after the Central Bank held interest rates steady at multi-year lows, dealers said. Demand for the greenback from importers surpassed inward remittances, dealers said. The rupee ended at 130.26/30 per dollar, weaker from Tuesday’s close at 130.22/26, its highest since 26 June last year. The Central Bank kept policy rates steady at multi-year lows on Wednesday for a fifth straight month as it expects lending to pick up in the second half of 2014. “We expect the bids to come down further with lower imports,” a currency dealer said on condition of anonymity. The Central Bank in a statement said it did not see much demand for imports in April, while private sector credit growth contracted 3.3% year-on-year in the same month, its worst performance since January 2010. It had risen 4.3% in March. “In view of the increased foreign currency inflows, the Central Bank has also absorbed around $550 million from the domestic foreign exchange market,” the Central Bank said. Early in the day, one of the two State banks, through which the Central Bank directs the market, bought dollars from select banks at 130.23 rupees, before the currency fell due to importer dollar demand, dealers said. The Central Bank bought dollars at 130.35 rupees on 30 May but started reducing its buying from then, allowing a gradual appreciation in the rupee. Central Bank Governor Ajith Nivard Cabraal told Reuters on 6 June that the rupee was facing appreciation pressure. The bank was condoning the trend on a gradual basis to allow all stakeholders to adjust to the changes. Cabraal had said earlier that the Central Bank would keep intervening in the currency market to prevent a rapid rise in the rupee. Dealers said the Central Bank’s intervention has prevented gains in the currency and they expect the rupee to face upward pressure until credit growth and imports pick up.