Stock market dips to 9-month low

Reuters: Sri Lankan shares fell for a third straight session on Tuesday, hitting a nine-month closing low, as investors sold shares of market heavyweight John Keells Holdings Plc amid worries over a weakening rupee and rising interest rates. 

The Colombo stock index ended down 0.54% at 6,159.12, its lowest close since 5 April. The bourse fell 9.7% in 2016, its second straight annual decline. 

The bourse dipped into oversold territory on Tuesday with the 14-day relative strength index at 29.238 points versus Monday’s 33.320, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral. 

“Keells selling brought the market down. A high net worth investor is selling Keells and that keeps market worried,” said Reshan Kurukulasuriya, Chief Operating Officer, Richard Pieris Securities Ltd.

Shares in John Keells Holdings ended 0.71% lower. 

In dollar terms, Sri Lanka’s stock market fell 13% in 2016, performing worse than emerging markets like Malaysia , Thailand, Indonesia and Singapore . 

Stockbrokers said Sri Lanka’s failure to attract foreign direct investment and lack of investor confidence due to a reversal in some budget policies weighed on the market and on the rupee, which fell 3.9% in 2016 and continues to be weak. 

Turnover stood at Rs. 353.9 million. 

Foreign investors sold a net Rs. 43.5 million of equities on Tuesday, extending the net foreign outflow in the first two days of the year to Rs. 69.9 million.

Shares in Hemas Holdings Plc dropped 3.8% while Aitken Spence Plc fell 6.57%.

Rupee ends down

Reuters: The Sri Lankan rupee closed slightly weaker in thin trade on Tuesday amid worry over slowing foreign fund inflows, while the Central Bank said defending the currency with foreign exchange reserves was not sensible.

Central Bank Governor Indrajith Coomaraswamy said after the markets closed on Tuesday defending the rupee currency with foreign exchange had become futile as a heavy defence was always followed with a sharp depreciation.

Rupee forwards were active, with one-month forwards ending at 151.00/20 per dollar, compared with Monday’s close of 150.95/151.00.

One-week forwards were quoted around 150.25/35, while spot-next forwards and the spot rupee were hardly traded, dealers said.

“The market is quiet and waiting for some strong inflows,” said a currency dealer who declined to be identified.“The Central Bank governor’s statement makes sense. I don’t think the Central Bank has adequate reserves to defend the currency strongly. It is more sensible to allow market players to determine it.”

The rupee has been under pressure due to imports and foreign investors exiting government securities, dealers said.

On Friday, the Central Bank raised the spot currency reference rate to 150.00, a record low against the dollar.

The banking regulator raised the spot reference rate by 50 cents last week, after a 40-cent increase in each of the previous two weeks amid sustained pressure on the currency.

Dealers said the market was bracing for some depreciation in the rupee in January after the Central Bank said its depreciation was not necessarily negative for the economy.