Shares fall for 7th session on rate hike concerns

Reuters: Shares fell for a seventh straight session on Wednesday to a near one-year closing low as expectations of a possible interest rate hike weighed on sentiment, after the International Monetary Fund urged the Central Bank to tighten monetary policy.

The Colombo stock index closed 0.2% lower at 6,032.16, its lowest close since 29 March 2016.

The index has lost 1.4% over the last seven sessions since the IMF urged Sri Lanka’s Central Bank last week to be ready to tighten monetary policy if credit growth or inflation did not abate. The Central Bank’s second monetary policy review of the year is due on 24 March.

“Market is down mainly because of the negative sentiment local investors have,” said Dimantha Mathew, head of research, First Capital Equities Ltd. “We are also seeing some margin calls coming in.” Most of the investors stayed on the sidelines, resulting in a thin turnover, which stood at Rs. 239.9 million ($ 1.6 million), about a third of this year’s daily average of Rs. 674.9 million.

The Bourse on Wednesday slipped into oversold territory with the 14-day relative strength index at 28.701 points versus Tuesday’s 30.958, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Shares of Sri Lanka Telecom Plc closed down 2%. Biggest listed lender Commercial Bank of Ceylon Plc ended 0.7% weaker, while Seylan Bank Plc fell 0.2%.

Foreign investors net bought shares worth Rs. 60.97 million in the 11th straight session of net-buying, raising the year-to-date net foreign inflow to Rs. 2.36 billion in equities.