Bourse extends losses on SEC rule; rupee dips further

Reuters: The stock market lost ground for the fourth straight session on Thursday to a fresh four-month low, pulled down by a new rule barring employees of broker firms from selling shares for six months after their purchase. Institutional investors stayed on the sidelines, waiting for directions after the introduction of the rule by Sri Lanka’s Securities and Exchange Commission (SEC).

The main share index fell 0.57 per cent, or 28.99 points, to 5,019.12, its lowest since 14 February.

The SEC’s decision followed a move by the state-run National Savings Bank last week to default on a Rs. 400 million ($ 3.07 million) deal on The Finance Company, bought at Rs. 49.75 when it was trading at Rs. 30.

The SEC issued a statement saying it had issued a directive to Taprobane Securities, which concluded The Finance Company deal, to suspend its Managing Director pending the conclusion of investigations into the deal.

Stockbrokers and analysts said the new rule hit the market as it covered all brokers. Analysts also said they were still waiting for further clarification.

“The SEC is trying to punish all the brokers instead of dealing with the culprit for the default deal,” a stockbroker said on condition of anonymity.

Analysts said the market was expected to dip further.

However, foreign investors continued to buy shares and brokers attributed the buying to a weaker rupee.

Foreign investors bought a net Rs. 24.2 million worth of shares, extending the total net inflows into the stock market to Rs. 22.3 billion so far this year. Turnover was Rs. 296.4 million against this year’s daily average of Rs. 1.04 billion.

The index is one of the worst performers among Asian markets, with a 17.4 per cent loss so far this year.

The rupee fell to 130.50/70 against the dollar from Wednesday’s close of 129.90/130 on importer demand for dollars.