Stock market up; rate hike boosts sentiment on economy

Reuters: Shares notched up a fifth session of gains to close at their highest in more than seven weeks on Wednesday, on hopes that economic fundamentals would improve after the Central Bank’s rate hike last week, analysts said.

The benchmark Colombo stock index ended up 0.13% at 6,511.58, its highest close since 14 June. The turnover hit a 2-1/2-month high with top conglomerate John Keells Holdings accounting for 36% of traded volume.

The Central Bank last week raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concerns about inflationary pressures.

“The indication given by the hike is that the rates will stay at these levels and will not come down, and the positive factor is that the inflation will be in check,” said Softlogic Stockbrokers Research Head Danushka Samarasinghe.

Overseas investors were net buyers of Rs. 24.1 million worth of shares on Wednesday, extending the net foreign inflow during the last six sessions to Rs. 750 million worth of equities. However, they have been net sellers of Rs. 4.06 billion worth of shares so far this year. Stockbrokers said the market is also awaiting an economic policy announcement from Prime Minister Ranil Wickremesinghe, scheduled later this month.

Turnover stood at Rs. 1.4 billion ($ 9.61 million), its highest since 18 May and more than this year’s daily average of around Rs. 733.4 million.

Shares in Lanka ORIX Leasing Company Plc rose 3.65%, John Keells Holdings gained 0.6%, while biggest-listed lender Commercial bank of Ceylon Plc climbed 1.2%.