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Tuesday, 15 July 2014 00:40 - - {{hitsCtrl.values.hits}}
By Wealth Trust Securities
Profit taking along with selling interest on overbought positions saw secondary market bond yields edge up marginally in early hours of trading yesterday following the monetary policy announcement for the month of July where the Central Bank of Sri Lanka was seen holding policy rates steady for a sixth consecutive month at 6.50% and 8.00%.
Activity surrounded the five and eight year maturities of 1 July 2019 and 1 July 2022 as its yields were seen hitting intraday highs of 8.20% and 9.18% respectively against its previous day’s closing levels of 8.12/15 and 9.05/10. However, buying interest at these levels curtailed any further upward movement as yields were seen dipping once again to close the day at levels of 8.12/15 and 9.09/12 as activity moderated.
Furthermore, yields on the shorter end of the yield curve was seen increasing as well, with the three year duration of 15 May 2017 being quoted at 7.43/48 and the two four-year durations of 1 April 2018 and 15 August 2018 at levels of 7.88/94 and 7.95/00 respectively against its previous day’s closings of 7.38/43, 7.83/88 and 7.90/95.
In money markets, surplus liquidity was seen remaining high at Rs. 27.92 billion as no Open Market Operation (OMO) auctions were conducted yesterday. Overnight call money and repo rates remained steady to average 6.87% and 6.53% respectively.
Rupee remains steady
The USD/LKR rate was seen closing the day steady at Rs. 130.20/22 yesterday as markets were at equilibrium. The total USD/LKR traded volumes for 11 July stood at $ 51.10 million. Some of the forward dollar rates that prevailed in the market were: one month – 130.45; three months – 130.93; and six months – 131.90.
Bourse closes at 33-month high on low rates
Reuters: Stocks hit a 33-month high on Monday as investors bought beverage and banking sector shares, while lower interest rates and continued foreign buying after the Central Bank left policy rates steady also helped.
The Central Bank kept policy rates steady at multi-year lows for a sixth straight month, as expected, despite private sector credit growth slowing to a 4-1/2 year low.
The main stock index rose 0.56%, or 37.63 points, to 6,699.03, its highest close since 5 October 2011.
The index is in overbought region since 3 July and the index has gained 5.02% so far this month, Thomson Reuters data showed.
“Investors are looking at good investment opportunities with the low interest rates,” said Reshan Kurukulasuriya, COO of Richard Peiris Securities.
Turnover was Rs. 597.2 million ($ 4.6 million), half of this year’s daily average of around Rs. 1.08 billion.
Analysts see room for gains with a P/E ratio of around 14.5 and resistance level at 7,000.
Monday’s gains were led by shares of Lion Brewery (Ceylon) Plc, which rose 14.97% to 684.2 rupees, while Ceylon Brewery Holdings Plc gained 2.94% to close at 672.30 rupees.
Ceylinco Insurance Plc rose 4.09 July to 1,400 rupees.
Lower interest rates have prompted local investors to buy shares and shift their savings from unattractive fixed assets, analysts said, as yields on treasury bills edged down further at a weekly auction on Wednesday.
Foreign investors net bought 28.35 million rupees worth of shares on Monday, extending net foreign inflows in stocks to 9.42 billion rupees so far this year.
Analysts said foreigners have been buying risky assets because they see value in them, while falling yields in fixed assets gradually prompt local investors to shift to equities.
The market has been on a rising trend since late February due to continued foreign buying and lower interest rates. ($1 = 130.2000 Sri Lankan Rupees)
Rupee steady at over 1-year high; gains curbed
Reuters: The rupee ended steady at its highest in more than a year on Monday as importer dollar demand outpaced inflows from remittances and exporter dollar sales, while State banks’ dollar buying curbed any sharp appreciation in the local currency.
The rupee ended flat at 130.20/22 per dollar, its highest close since 26 June 2013.
The Central Bank kept policy rates steady at multi-year lows for a sixth straight month on Monday as expected, despite private sector credit growth slowing to a 4-1/2 year low.
“There is import (dollar) demand but it is trading flat with inflows and the State banks buying at 130.20,” a currency dealer said.The one-month forward premium traded a tad weaker at 13/22 cents from its near three-year low of 10/20 cents, but dealers expect further gains in the currency.
The dealers said dollar-buying by state banks checked sharp gains, though forward premiums were coming down with increased forward selling.
The Central Bank usually directs the market through the two State banks, but the dealers said they were not quite sure if the state banks were buying for the Central Bank.
Central Bank officials were not immediately available for comment.
The fuel import bill, which accounts for about 20% of monthly imports, is also on the decline as the country has been shifting to alternative power sources such as coal and hydro power, the dealers said. The cost of fuel imports fell 35.4% percent in May to $208.9 million, compared with the same month a year earlier. Sri Lanka’s trade deficit narrowed by 47.9% to $393.4 million in May from $754.9 million a year earlier, mainly due to lower imports, Central Bank data showed on Monday.
The Central Bank had absorbed about $735 million from the domestic foreign exchange market by 10 July, it said in a statement on Monday.
