CSE recovers from near 5-year closing low on bargain-hunting

Reuters: Shares recovered from their lowest close in nearly five years hit in the previous session and ended about 1% higher yesterday as investors picked up battered stocks.

The benchmark index hit a near five-year low on Tuesday on foreign selling amid a weaker rupee and Government plans to curb imports hurt investor sentiment.

The Colombo stock index rose 0.92% to 5,887.52, pulling away from its lowest close since 18 December 2013 hit on Tuesday.

“Market bounced back with buying in heavyweights like John Keells which came down over the last few days,” said Softlogic Stockbrokers Deputy CEO Hussain Gani.

“We have seen some investors picking up value shares, but most of the investors are still waiting to see if the rupee is stabilising and the economic impact of rupee’s fall.”

Prime Minister Ranil Wickramasinghe said on Monday the Government would take measures to impose taxes to curb imports by $ 500 million to $ 1 billion to face the currency crisis.

Sri Lanka’s Finance Minister urged its people to buy local products and shun unnecessary imports in order to reduce the trade deficit and help stabilise the currency that revisited its all-time low on Wednesday.

The rupee has weakened 4.6% so far this month after a 1.2% drop last month, and has declined 10% so far this year.

Analysts said the acceleration in the rupee’s depreciation was creating panic among investors.

Turnover was Rs. 318.5 million ($ 1.89 million), less than half of this year’s daily average of Rs. 790.8 million.

Foreign investors sold a net Rs. 49.6 million worth of shares on Wednesday, extending the year-to-date net foreign outflow to Rs. 5.7 billion worth of equities.

Analysts said the recent fuel price hike also hurt investor confidence as it could hit corporate earnings. Fuel retailers raised gasoline and diesel prices earlier this month for a third time in four months due to higher global oil prices and a weaker rupee.

Investors are awaiting cues from the National Budget in November.

Shares of conglomerate John Keells Holdings PLC rose 3.8% while Sri Lanka Telecom PLC jumped 6.5%, and Commercial Leasing and Finance Company PLC closed 8.0% firmer.