Stocks edge up from near 3-week low in thin trade; rupee lower

Saturday, 8 June 2019 00:01 - - {{hitsCtrl.values.hits}}

Reuters: Sri Lankan shares ended a shade firmer, snapping a four-session losing streak to edge up from the lowest close in nearly three weeks the previous session, while the rupee ended slightly weaker on mild importer dollar demand, market sources said.

On May 31, the Central Bank cut its key interest rates to support a faltering economy as overall business and consumer confidence slumped following deadly bomb attacks in April. Traders said the Easter Sunday bombings and violence following the attacks, and worries over slowing growth, weighed on investor sentiment. Most investors have shied away from the market since the 21 April bombings that killed more than 250 people.

Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the bombings, junior finance minister Eran Wickremeratne told Reuters last month. A Reuters poll has forecast growth to slump to its lowest in nearly two decades this year.

The Central Bank chief on 31 May said he expected the economy to grow by 3% or less this year due to the impact of the Easter attacks, and the Bank was preparing a downward revision to its earlier projection for 4% growth.

The benchmark stock index ended 0.4% firmer on Friday at 5,298.18, edging up from its lowest close since 17 May on Thursday. But it fell 0.24% for the week. The bourse has declined 12.46% this year. Sri Lankan markets were closed on Wednesday for a holiday.

The Government’s pension fund has resumed investing in risky assets as the stock market is “extremely undervalued at the moment and is considered a good time to go in”, the Central Bank Governor said on Friday. Turnover was Rs. 169.5 million ($961,702), less than this year’s daily average of about Rs. 535.5 million. Last year’s daily average was Rs. 834 million.

Foreign investors bought a net Rs. 54.02 million worth of shares on Friday, but they have been net sellers of Rs. 5.52 billion worth of equities this year. The rupee ended at 176.45/55 per dollar, compared with Thursday’s close of 176.35/50, market sources said.

Analysts expect the rupee to weaken further as money flows out of stocks and government securities. The rupee fell 0.03% for the week but is up 3.49% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia.

Foreign investors bought a net Rs. 716.3 million worth of government securities in the week that ended on 29 May, but the island nation has seen a net foreign outflow of Rs. 18.4 billion this year, Central Bank data showed.

Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved Parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds.