CSE edges down after CB cuts economic growth estimate

Saturday, 7 July 2018 01:36 - - {{hitsCtrl.values.hits}}

Reuters: Sri Lankan shares edged lower yesterday in moderate volume as selling in late trade weighed on the market after the Central Bank cut its economic growth estimate.

Economic growth in 2018 is likely to be between 4% and 4.5%, falling short of an earlier estimate of 5%, Central Bank Governor Indrajit Coomaraswamy told reporters yesterday, adding that the earlier estimate was “ambitious”.

Foreign investor selling and concerns about lower economic growth weighed on sentiment, analysts said. The Colombo stock index ended 0.15% weaker at 6,108.71, a day after it posted its sharpest daily gain since 21 November 2017.

It hit its lowest close since 30 March 2017 on Wednesday, and has declined for an 18th session in 21 through yesterday. The index fell 1.4% for the week.

“Investors are still confident and there are margin calls forcing investors to sell their stakes,” said Acuity Stockbrokers CEO Prashan Fernando. “There was some bargain hunting, but the late selling brought down the index.”

Before the market opened, the Central Bank kept the key interest rates unchanged at its policy review.

Foreign investors sold equities for a 12th consecutive session, extending the foreign outflow to Rs. 1.43 billion ($ 8.99 million).

They net sold equities worth Rs. 161 million yesterday, extending the year-to-date foreign outflows to Rs. 2.23 billion.

Turnover was Rs. 753.5 million, less than this year’s daily average of Rs. 921 million.

Distilleries Co of Sri Lanka PLC, which jumped over 10% on Thursday, ended 5.4% weaker, while leading mobile phone operator Dialog Axiata fell 0.7%.

Investors are waiting for some positive news, both on the economic and political fronts, said analysts, adding that the Government’s policy implementation had been sluggish since both main parties in the ruling coalition lost local polls in February.

The International Monetary Fund (IMF) said on 20 June that Sri Lanka’s economy remained vulnerable to adverse shocks because of sizable public debt and large refinancing needs

Ratings agency Moody’s said last week a strengthening dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation.

Moody’s said a strong dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey and Zambia.