Bourse falls to over 1-month closing low on higher rates

Tuesday, 10 March 2015 01:21 - - {{hitsCtrl.values.hits}}

Reuters: Stocks fell to a more than one-month low on Monday, losing for a sixth consecutive session, as investors stayed on the sidelines amid rising interest rates and political uncertainty ahead of parliamentary elections. The main stock index fell 0.66%, or 47.17 points, to 7,136.33, its lowest close since 5 February, extending the fall to 2.48% in the last six sessions. “Local institutional and high net-worth investors were fairly inactive in the market,” TKS Securities (Pvt) Ltd. said in a note to investors. Analysts said investors were waiting for clarity on interest rates and on the political front. The Central Bank removed a penalty rate of 5% on its repo rate with effect from 2 March. The bank had imposed the penalty in September to discourage commercial banks from parking money with it at an interest rate of 6.5%. The scrapping of the penalty resulted in a rise in t-bill yields of between 86 basis points and 91 basis points last Tuesday. The Central Bank plans to raise 50 billion rupees ($ 376.36 million) through government securities this week, it said on its website. Elections to Sri Lanka’s 225-member parliament are expected to be announced after 23 April and it is unclear whether the ruling coalition led by President Maithripala Sirisena would contest unitedly or go to the polls separately. Political analysts expect a hung parliament if Sirisena’s coalition members contest separately in the polls. Shares in Ceylon Tobacco Company Plc fell 1.93%, while Shalimar Estate declined 13.64%. Turnover was Rs. 665.4 million ($ 5 million), well below this year’s daily average of Rs. 1.37 billion. Foreign investors were net buyers of Rs. 214.6 million worth of shares, extending the year-to-date foreign inflow to Rs. 2.37 billion.

Rupee steady; downward pressure seen easing

Reuters: The rupee ended steady on Monday on moral suasion by the Central Bank, with the market expecting downward pressure on the currency to ease due to higher government borrowing amid rising interest rates. “The rise in interest rate and heavy demand for the rupee by the Government will ease the pressure. Exporters will start converting dollars when the rise in interest rates becomes attractive to convert their dollars into rupees,” a currency dealer said on condition of anonymity. “But exporters are still waiting to see a further rise in interest rates.” Actively traded one-week forwards were steady at 133.60/75 per dollar, on moral suasion by the Central Bank. Central Bank officials were not available for comment. The spot currency was also steady at 132.90/133.20, for a ninth straight session, well within the limits set by the central bank. Dealers said some banks sold dollars to cover their net open positions. The Central Bank plans to raise Rs. 50 billion ($ 376.36 million) through government securities this week, its said on its website. The Central Bank removed a penalty rate of 5% on its repo rate with effect from 2 March. The bank had imposed the penalty in September to discourage commercial banks from parking money with it at an interest rate of 6.5%. The scrapping of the penalty resulted in a rise of between 86 basis points and 91 basis points in t-bill yields last Tuesday. Central Bank Governor Arjuna Mahendran said last Thursday that the country’s foreign reserves were on the rise, indicating that the bank was not intervening as aggressively in the forex market as earlier. He said Sri Lanka’s foreign reserves have increased to over $ 7 billion, from $ 6.3 billion in January.