Bourse slips from near 3-yr high on technical correction
Wednesday, 6 August 2014 01:26
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REUTERS: Sri Lankan stocks slipped on Tuesday from a near-three-year closing high in the previous session led by large-cap shares such as Ceylon Tobacco Company PLC and on technical correction in some over-valued shares, analysts said.
The main stock index ended 0.1%, or 6.73 points, weaker at 6,815.42, slipping from its highest close since 20 September, 2011 hit on Monday. It rose 6.82% in July and is up 15.27% so far this year.
“The drop in CTC led the decline in the market. CTC’s lower-than-expected results and some correction in over-valued shares brought the market down,” said a stockbroker asking not to be named.
The bourse hit a near-three-year high on Monday on expectation of strong corporate earnings and interest rates falling further with continued buying by foreign investors.
Hopes of strong corporate earnings, declining interest rates and continued buying by foreign investors have helped boost interest in risky assets in the $ 21.97 billion-worth stock market.
Turnover was Rs. 1.57 billion ($ 12.06 million), more than this year’s daily average of about Rs. 1.09 billion.
Foreign investors were net buyers of Rs. 107.1 million worth of shares on Tuesday, extending the year-to-date net foreign inflow to Rs. 11.04 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.
Losses were led by large-cap share Ceylon Tobacco Company PLC which fell 1.04% to Rs. 1,137.20 a day after the company reported an 11% fall in June quarterly earnings.
Shares in Carson Cumberbatch PLC fell 1.08% to Rs. 460 while top conglomerate John Keells Holdings PLC fell 0.04% to Rs. 236.90.
Shares in biggest listed lender Commercial Bank of Ceylon PLC fell 0.98% to Rs. 141.50.
Capital Alliance Finance PLC in a discloser to the bourse said its controlling shareholder Capital Alliance Holdings Ltd. divested 68.43% of its issued capital to Cargills Bank at prices ranging from Rs. 15.40 to Rs. 15.50.
Lower interest rates have prompted local investors to buy shares and move away from unattractive fixed assets, analysts said. Yields on treasury bills edged down further by 7-10 basis points at a weekly auction on Wednesday.
The International Monetary Fund urged Sri Lanka on Wednesday to keep key interest rates on hold for the near term and said a cautious approach is warranted.
Rupee erases early gains, ends flatREUTERS: The rupee ended flat on Tuesday erasing early gains, with late import demand from a state bank offsetting inflows from exporter dollar sales and inward remittances, dealers said.
The rupee ended at Rs. 130.21/24 per dollar, unchanged from Monday’s close after it rose to Rs. 130.20 in early trade due to inflows from remittances and exports.
“There was severe buying by a state bank to cover its import bills, probably for an oil bill,” said a currency dealer.
Dealers also said they expect the currency to be under upward pressure in the absence of strong growth in private credit and imports.
Two state banks, through which the Central Bank has been directing the market, have been buying the local currency at Rs. 130.21, preventing a sharp rise, dealers said.
The Central Bank’s dollar purchases from the market have increased rupee liquidity and sent yields on government securities lower amid lacklustre demand for private credit and imports, they said.
The Central Bank has absorbed more than $ 750 million this year through 14 July from the market to prevent a sharp appreciation in the rupee and support exporters.
A Central Bank official said last month the rupee would have risen to Rs. 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.
