Bourse hits 1-year high on rate-cut hopes

Saturday, 14 June 2014 00:55 - - {{hitsCtrl.values.hits}}

Reuters: Shares rose to one-year closing highs on Friday, led by gains in banking shares on expectations of a further 50 basis points rate cut in the next week’s Central Bank policy rates announcement, dealers said.

The main stock index rose 0.70%, or 43.86 points, to 6,337.22, its highest close since 10 June 2013. “The market is broadly expecting a 50 basis point rate cut next week,” a stockbroker said on condition on anonymity. “There has been a lot of expectations that there could be another rate cut. We see some debenture issues have been scheduled in the near future at a rate below the current market rates.” The Central Bank has reduced its key policy rates to multi-year lows, but has not yet seen any improvement in credit and import growth. March credit growth slowed to a four-year low of 4.3% year-on-year. Central Bank Governor Ajith Nivard Cabraal told Reuters on 30 May that the Central Bank was creating room to cut interest rates further. The Central Bank will announce its June monetary policy rates on 18 June. Continued foreign buying and expectations of interest rate cuts have boosted sentiment and the market has been on a rising trend since late February. The Bourse saw a net foreign inflow for the 11th straight session. Foreign investors bought Rs. 176.9 million ($ 1.36 million) worth of shares on Friday, extending the net inflow for the past 11 days to Rs. 3.71 billion worth of shares. They have been net buyers of Rs. 5.55 billion so far this year. Turnover was Rs. 809.3 million, below this year’s daily average of Rs. 1.01 billion. Shares in fixed line telephone operator Sri Lanka Telecom Plc rose 2.35% to Rs. 48, leading the gains in the overall index. Palm oil firm Bukit Darah Plc advanced 2.9% to Rs. 650. Financial firm Orix Leasing Co Plc rose 4.01% to Rs. 90.80, while Commercial bank of Ceylon Plc rose 1.36% to Rs. 133.80.