Reuters: Sri Lankan shares fell for a fourth straight session on Thursday to close at their lowest level in over 17 months as continued foreign selling weighed on the market, amid fears over investors shifting to risk-free assets such as government securities.

Local investor appetite for risky assets eroded after the Central Bank raised commercial banks’ statutory reserve ratio last week by 150 basis points with effect from  16 January.

The main stock index ended 0.62% down at 6,775.27, its lowest close since 21 July 2014. It has fallen 1.7% so far this week.

Foreign investors sold a net Rs. 251.85 million ($1.75 million) worth of equities on Thursday and a net Rs. 1.56 billion worth of equities so far this year, as compared with Rs. 4.43 billion in 2015.

“The market is losing ground as foreigners are exiting daily,” said SC Securities Ltd, Head of Research Yohan Samarakkody.

“This year will be packed with a lot of global uncertainties. So investors want to park their investments at safer locations,” he added.

After China witnessed a fall in the yuan, global shares tumbled for a sixth session on Thursday, oil prices fell to near 12-year lows, and Shanghai shares dived 7%, igniting fears of competitive devaluations across Asia.

Following the Central Bank’s move, the yield on 91-day t-bill rose 14 basis points to an over-two-month high of 6.59% at a weekly auction on Wednesday.

Analysts expect more investors to shift from risky assets to fixed assets with higher interest rates and the shrinking of global investments in Sri Lanka.

Shares in conglomerate John Keells Holdings Plc fell 1.76% while Sri Lanka Telecom Plc lost 2.4%, dragging the overall index.

Gold hits nine-week high

LONDON, 7 Jan (Reuters) - Gold climbed above $1,100 an ounce for the first time in nine weeks on Thursday as the dollar fell and investors channeled money into safer assets after worries about the Chinese economy hit global stocks.

European shares fell sharply after China accelerated the depreciation of the yuan and Asian shares hit a three-month low.

China’s stock markets were suspended less than half an hour after opening on Thursday after sharp falls triggered a new circuit-breaking mechanism for a second time since its introduction this week.

Spot gold rose to a nine-week high of $1,102.80 an ounce, before paring some gains to trade 0.4% higher at $1,098.70 by 12:49 GMT. U.S. gold futures also jumped for a fourth straight session to a nine-week high of $1,102.50.

“Gold’s strength is probably going to be relatively short term, but  if the view that China is going to pull the whole world into recession becomes stronger, there is an upside risk to gold, “ Citigroup metals strategist David Wilson said.

“However if the U.S. and Europe continue to grow, gold will go weaker ... Chinese stock markets have become  massively over-inflated because a lot of money piled into them  and now people have come back to reality.”

Gold, often seen as an alternative investment during times of geopolitical and financial uncertainty, benefited from the risk-averse sentiment in the market along with other safe-haven assets such as the Japanese yen and U.S. Treasuries.

“Gold is clearly re-establishing its role as a safe-haven. For as long as global stock markets - in particular China’s - appear wobbly, gold is likely to attract a good bid,” HSBC analyst James Steel said.

Rupee ends steady

Reuters: The Sri Lankan rupee ended steady on Thursday as dollar sales by a private bank were offset by demand for the greenback from importers, dealers said.

The rupee closed at 143.90/95 per dollar, little changed from Wednesday’s close of 143.90/144.00. It hit a record low of 144.30 on Monday.

“A private bank was selling dollars at 143.90 and that helped the rupee to end steady despite importer dollar demand,” said a currency dealer on condition of anonymity.

Some dealers said the private bank could have sold dollars on behalf of the Central Bank. Officials at the Central Bank were not available for comment.

The Central Bank, in a move to instill investor confidence, on Monday said it would lift all restrictions on outflows by nationals who send money that is earned in foreign currencies.

Central Bank Governor Arjuna Mahendran said the steep fall in the rupee has slowed and currency seemed to be stabilising at the current level, due to inflows from remittances.

Some analysts expect the rupee to stabilise due to a gradual rise in market interest rates. Yields on 91-day t-bills rose by 14 basis points to a more-than-two-month high at a weekly auction on Wednesday, after the Central Bank raised the statutory reserve ratio by 150 basis points with effect from 16 January.

Commercial banks parked Rs. 78.2 billion ($543.81 million) of surplus liquidity on Thursday using the Central Bank ‘s deposit facility at 6%, official data showed.