Stock market falls for 5th session; deal reversal order weighs

Reuters: Shares fell for a fifth straight session on Monday to close at their lowest in nearly three weeks, led by large caps, as an order to reverse a share transaction weighed on sentiment despite foreign inflows.

Sri Lankan Prime Minister Ranil Wickremesinghe has ordered a reversal and a probe into the Rs. 1.3 billion ($ 8.7 million) Seylan Bank foreign deal as it failed to follow proper procedure, the country’s finance minister said on Monday.

The transaction of 13 million shares or 7% stake in Seylan Bank, owned by state-run Bank of Ceylon, went through on Friday and a foreign fund bought the shares at Rs. 100 each, a 17.6% premium to the stock’s closing price that day.

The Colombo stock index ended 0.29% weaker at 6,250.57, its lowest close since 30 November. The bourse has fallen 1.4% in five straight sessions through Monday.

“This is year-end market trading, but the news on reversal of Seylan Bank shares is not good for the market,” a stockbroker said asking not to be named.

Shares in Seylan Bank closed 5.5% higher at Rs. 89.70 on Monday, on speculation the foreign fund may buy more shares from the market at a premium to its closing price of 85 rupees a share on Friday, two stockbrokers said. Turnover stood at Rs. 260.7 million ($ 1.75 million), around a third of this year’s daily average of around Rs. 750 million.Foreign investors bought a net Rs. 66.1 million worth of shares on Monday, extending the year-to-date net foreign inflow to Rs. 1.94 billion worth of equities. Shares in Ceylon Tobacco Company fell 1.16%, while top private lender Commercial bank of Ceylon lost 1% to drag down the overall index.

Rupee closes lower on importer dollar demand

Reuters: The rupee closed weaker on Monday on importer dollar demand, as the market braced for declines in the local currency with the central bank raising the spot reference rate following a hike in US interest rates, dealers said.

The US Federal Reserve raised interest rate by 25 basis points on Wednesday and signalled a faster pace of increases in 2017 as central bankers adapted to the incoming Donald Trump administration’s promises of tax cuts, spending and deregulation.

Rupee forwards were active with spot-next forwards closing at 149.60/80 per dollar, compared with Friday’s close of 149.40/70.

“There was importer dollar demand today, while we did not see usual year-end exporter sales,” said a currency dealer, asking not to be named.

On Thursday, the Central Bank increased the spot reference rate by 30 cents to 149.10, a day after raising it by 10 cents. The spot rupee was hardly traded on Monday.

The dollar and US bond yields fell while Asian shares hit a four-week low, as investors cashed in on some of their recent bets that the anticipated fiscal boost from the incoming Trump administration will support riskier assets.

The rupee usually rises in December ahead of Christmas and New Year due to remittances from expatriates, but dealers said the currency was expected to face pressure this time due to higher dollar demand from importers following the Fed rate hike.

Analysts expect some capital outflow as the immediate reaction to the Fed rate hike and are also concerned over the Government’s foreign borrowing cost rising in the short term.

Foreign investors net sold Rs. 52.3 billion ($350.77 million) of Government securities in the eight weeks ended 14 December.