Shares fall to 5 ½ year low; rupee steady after dollar bond sale

Reuters: Shares fell to a near five-and-a-half-year low on Friday as investors sold large-cap stocks, outweighing purchases by foreigners. 

The Colombo Stock Exchange index settled 0.52% lower at 5,722.25, its lowest close since 18 September 2013. The benchmark stock index fell 1.63% for the week, recording its third straight weekly fall. It declined 2.9% in February, its second straight monthly fall. The turnover was Rs. 2 billion ($ 11.21 million), more than double of last year’s daily average of Rs. 834 million.

Foreign investors bought a net Rs. 145 million worth of shares on Friday, but they have been net sellers of Rs. 5.97 billion worth of equities so far this year. 

The rupee closed steady as the island nation sold $ 2.4 billion in five-year and 10-year dollar-denominated bonds, successfully tapping the international markets at a time the country is facing strains on its finances. The sale is crucial for the island nation to boost investor sentiment which was dented by rating downgrades by all three rating agencies after a political crisis in October. 

The rupee closed unchanged at 178.40/60 per dollar for a third day. Market sources said they expected inflows from the sovereign bond sale will help boost the rupee. 

Finance Minister Mangala Samaraweera on Tuesday presented the 2019 Budget that raises spending while setting an ambitious goal to reduce the country’s large fiscal deficit. The IMF last week agreed to extend Sri Lanka’s $ 1.5 billion loan program by one year and has reached staff-level agreement to disburse the sixth tranche of the loan. 

The rupee has climbed 2.4% so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a $ 1 billion sovereign bond in mid-January. Worries over heavy debt repayment after the 51-day political crisis that resulted in a series of credit-rating downgrades dented investor sentiment as the country struggled to repay its foreign loans. The rupee dropped 16% in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. Foreign investors exited government securities for the second straight week in the week ended 27 February, with net sales of Rs. 3.4 billion, the Central Bank’s latest data showed