Friday, 17 April 2015 04:44
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Reuters: The main stock index gained over 1% to a one-month closing high on Thursday, as upbeat local investors turned to risky assets after the central bank in a surprise move on Wednesday cut key monetary policy rates by 50 basis points.
The main index gained 1.38% to 7,077.27, its highest close since 16 March.
Sri Lanka’s Central Bank on Wednesday surprised markets by cutting key policy rates to record lows in a move aimed at boosting economic growth amid near zero inflation.
“Now the direction on interest rates is very clear and gains could be sustained after the rate cut,” said deputy CEO at Softlogic Stockbrokers Ltd. Hussain Gani.
“We see more participation of local investors, including retailers. Foreigners are also trading in high volume. Investors were uncertain about interest rates, but now it is evident that the new government wants to lower interest rates further.”
Local investors were mainly on the buying side while foreigners were sellers.
The market saw a net foreign outflow for the first time in the last nine sessions with foreign investors selling a net Rs. 310.7 million ($ 2.34 million) worth of shares on Thursday. However, the market has seen a net foreign inflow of Rs. 3.43 billion so far this year.
The day’s turnover was Rs. 1.17 billion, just above this year’s daily average of Rs. 1.11 billion.
Top mobile phone operator Dialog Axiata gained 3.6%, helping to boost the index.
The index had lost 6.6% last month, its biggest monthly drop since October 2012, as investors sold their holdings to settle margin trades amid concerns about political stability and a rise in interest rates.
Investors have been cautious due to political uncertainty as Prime Minister Ranil Wickremesinghe’s party did not have a majority in Parliament, stockbrokers said.
They said, however, efforts by both ruling and opposition parties for a stable government have helped to improve investor confidence, adding that investors were still largely on a wait-and-see mode ahead of parliamentary elections possibly in June.
