Stock market posts over 2-week closing high on foreign buying

Reuters: Shares rose for a fourth straight session on Monday and posted their highest close in more than two weeks, as foreign investors continued to buy into battered banking and diversified stocks after recent losses.

Overseas investors, who have offloaded shares worth a net Rs. 5.29 billion Sri Lankan ($36.48 million) so far this year, bought equities worth a net Rs. 344.5 million on Monday.

Foreign investors have bought a net Rs. 1 billion worth shares in the four straight sessions through Monday.

Turnover was at Rs. 878.8 million, more than this year’s daily average of Rs. 737.3 million.

The benchmark Colombo stock index ended 0.09% higher at 6,372.24, its highest close since June 23. It gained 1.26% last week, the first weekly gain in four.

“Some positive sentiment is building up with the sovereign bond yield is coming down compared to the initial price guidance,” said First Capital Equities Ltd head of research Dimantha Mathew.

Sri Lanka has received orders exceeding $4.5 billion for a two-tranche bond it launched on Monday forcing the yields lower whit the final guidance for the 5.5-year tranche around 5.8% (+/-5BPS) lower than initial guidance which was in the area of 6.125%.

For the 10-year bond final guidance was around 6.875% (+/-5BPS) lower than the initial guidance of around 7.125%.

Shares have been on a downward trend recently, hitting their lowest close since 7 April on 4 July after falling 10 out of 11 sessions, on worries over a capital gains tax on stocks, high interest rates and policy uncertainty.

Shares of biggest listed lender Commercial Bank of Ceylon Plc rose 1.85%, while those conglomerate John Keells Holdings Plc rose 0.28%.

Rupee ends weaker ahead of sovereign bond sale

Reuters: The rupee ended weaker on Monday as importers and banks bought dollars, speculating that foreign holders of the country’s existing sovereign debt might sell them in order to invest in newly launched higher-yielding dollar bonds.

A new dual-tranche dollar bond float saw orders exceeding $4.5 billion. The final guidance for the 5.5-year tranche was around 5.8% (+/-5BPS) lower than initial guidance which was in the area of 6.125%.

For the 10-year bond final guidance was around 6.875% (+/-5BPS) lower than the initial guidance of around 7.125%.

The bonds could raise up to $1.5 billion, three sources close to the deal told Reuters on Monday, as book building began.

The Sri Lankan rupee one-week forwards, which have been acting as a proxy for the spot rupee, ended at 146.20/50 per dollar, weaker than Friday’s close of 146.00/10.

The spot rupee is tightly managed by the central bank and market participants use the forward market levels for guidance on the currency.

“The demand was there and investors were waiting to see the outcome of the sovereign bond (issuance). If the rates are higher, we might see some foreigners holding on to local bonds shifting to the sovereign bond,” said a currency dealer, asking not to be named.

Dealers said the central bank did not intervene in the foreign exchange market for the fifth straight session on Monday.

Last week, central bank governor Dr. Indrajith Coomaraswamy said the bank would manage the exchange rate flexibly avoiding too much volatility.

Nandalal Weerasinghe, the deputy governor, also said last week that the level of central bank intervention had come down drastically and that it had been absorbing dollars instead of selling.

The spot rupee was not quoted, but the spot-next, which are rupee forwards settled three days after the spot rupee settlement ended at 146.10/30, dealers said.