Bourse at 6-wk low; falls below key barrier

Thursday, 20 February 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Shares fell for a fifth straight session on Wednesday to a six-week low, breaching the psychological 6,000-point mark despite foreign investors buying the country’s risky assets. The main stock index ended down 0.59%, or 35.42 points, at 5,986.24, its lowest close since 7 January. It has dropped 4.19% in the last 11 sessions. Foreign investors were net buyers for the first time in the last three sessions, purchasing a net Rs. 197.8 million ($ 1.51 million) worth of shares. But they have been net sellers of Rs. 4.67 billion in the past nine sessions as some offshore funds exited the market. The bourse has seen Rs. 3.28 billion of foreign outflows so far in 2014, after enjoying net inflows of Rs. 22.88 billion last year. Analysts said investors were concerned over possible further foreign outflows, though local investors are still optimistic about risky assets due to falling interest rates. On Monday, the Central Bank kept its policy rates steady at multi-year lows while analysts said local investors were active in the market after interest rates on treasury bills eased to multi-year lows, making fixed-income assets unattractive. Analysts said local investors were active in the market after interest rates on Treasury bills eased to multi-year lows, making fixed-income assets unattractive. Top conglomerate John Keells Holdings Plc lost 1.56% to close at Rs. 215, pulling the overall index down. Shares of market heavyweight Ceylon Tobacco Co Plc fell 0.90% to Rs. 1,198.80. The index is still 1.24% up so far this year, following a 4.8% gain in 2013. The day’s turnover was Rs. 714.6 million, less than this year’s daily average of about Rs. 1.2 billion.

Rupee steady; State banks’ dollar sales offset importer demand

Reuters: The rupee ended steady on Wednesday as state banks sold dollars to offset demand for the US currency from importers and on stock-related outflows, dealers said. The spot rupee ended flat at 130.85/90 per dollar. “The rupee continued to be on bid and there were not too many sellers,” said a currency dealer, asking not to be named. Dealers also said the forward market was active in the absence of an effective spot market. Spot-next or three-day forward ended at 130.93/131.00 per dollar. It was not active on Tuesday, dealers said. Three dealers confirmed that the two state banks, through which the Central Bank usually directs and intervenes in the market, sold dollars at Rs. 130.85. The Central Bank on Monday kept policy rates steady at multi-year lows, with inflation expected to be contained throughout 2014 by “well-managed demand conditions and improved domestic supply.” The market is still concerned about the sustainability of the Central Bank’s policy measures to maintain a stable exchange rate, which is defended via selling and buying dollars, in a low-interest-rate regime. However, Central Bank Governor Ajith Nivard Cabraal said on Monday that “current conditions are sustainable,” for lower interest rates and a stable exchange rate, but did not elaborate. Currency dealers and traders said the Central Bank’s policies should work until the market sees a jump in private sector credit growth, which has risen 7.5% year-on-year in December from 7.3% a month earlier. Dealers expect the Central Bank to keep the currency below 130.85 per dollar until April. Usually, the rupee is under pressure in March and early April due to seasonal imports ahead of the traditional New Year in mid-April. The rupee has gained about 3.3% since it hit a record low of 135.20 on 28 August last year. It lost 2.5% in 2013.