Reuters: Shares closed at a four-week low in thin trade on Thursday, led by blue chips amid foreign investor outflow as investor sentiment took a hit on rising interest rates despite the Central Bank keeping key policy rates steady last week.

Yields on Treasury bills edged up by between five and 27 basis points to near three-year highs at a weekly auction on Wednesday. The Central Bank left key policy rates steady for a third straight month.

The benchmark stock index fell 0.22%, or 14.73 points, to 6,568.76, its lowest close since 29 April. It fell 1.12 percent last week, its first weekly fall in seven weeks.

“We expect negative trend to continue with the rising interest rates and also on the continued foreign outflow,” said Dimantha Mathew, Head of Research of First Capital Equities Ltd.

“We expect the market to bounce back once the expected IMF and sovereign bond inflows come.”

Foreign investors net sold Rs. 205.8 million ($1.41 million) worth of shares on Thursday, extending the year-to-date net foreign outflow to Rs. 4.91 billion worth of shares.

Turnover stood at Rs. 398.1 million ($2.71 million), the lowest since 26 March and nearly half this year’s daily average of around Rs. 797.8 million.

Top conglomerate John Keells Holdings, which on Tuesday announced a share subdivision, fell 1.71%. Keells posted a 13% fall in March quarter earnings on Wednesday.

Shares in  Sri Lanka Telecom Plc fell 0.73% while Cargills (Ceylon) Plc lost 3.13%, dragging down the overall index.

Concerns over a Government move to increase the value added tax and impose new taxes effective 2 May, which could hit the bottom line of many companies, also dented sentiment, analysts said.

Rupee forwards end weaker on importer dollar demand

Reuters: Rupee forwards ended weaker on Thursday due to importer dollar demand amid apprehension the currency would weaken on a possible increase in Government spending after the country’s worst natural disaster since 2004, dealers said.

The cost of landslides and floods after days of torrential rains will be between $1.5 billion and $2 billion at the minimum, the government said earlier this week, as the Indian Ocean island struggles to recover from a cyclonic storm.

The dollar/rupee forwards, known as spot next, ended at 147.40/50 per dollar, compared with Wednesday’s close of 147.05/30.

The spot next, which acts as a proxy for the spot currency, indicates the exchange rate for the day following the conventional spot settlement, which is five days ahead for Thursday’s trade.

“There was importer demand. But dealers are reluctant to trade (forwards) below 147.50 fearing repercussions from the Central Bank, and we have seen Central Bank offering to some select trades at 145.80,” a currency dealer said, asking not to be named.

Central Bank officials were not available for comment.

The Government was in the process of borrowing up to $3.5 billion from foreign sources via syndicated loans, sovereign bonds, and Islamic bonds, Finance Minister Ravi Karunanayake said on Wednesday.

Analysts said foreign inflows from such loans or bond issues would ease pressure on the rupee.

The spot currency did not trade on Thursday.

The spot rupee reference rate has been pegged at 145.75, dealers said. The Central Bank had fixed the spot rate at 143.90 per dollar until 2 May.