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Wednesday, 6 April 2016 01:02 - - {{hitsCtrl.values.hits}}
Reuters: Sri Lankan shares rose 1.3% on Tuesday to a five-week closing high, as local retail investors bought beaten-down banking and diversified stocks while continued offloading by foreign investors amid worries over macroeconomic stability weighed on sentiment.
Foreign investors sold a net Rs. 226.2 million ($1.57 million) worth of equities, their fourth straight session of selling, and extending the year-to-date outflows to Rs. 2.85 billion.
The benchmark share index ended 1.31%, or 79.87 points, higher at 6,159.02, its highest close since 29 February.
At Rs. 907.4 million, turnover surpassed this year’s daily average of Rs. 793.8 million due to some block deals.
“It’s a retail push,” said Prashan Fernando, COO, Acuity Securities.
The market will see subdued trade in the coming days due to the Sinhala-Tamil new year on April 13 and 14, traders said.
Shares of the country’s biggest listed lender, Commercial Bank of Ceylon Plc, rose 2.88% while Lanka ORIX Leasing Company Plc jumped 5.46%.
Analysts said investors are cautious about macroeconomic uncertainty after a rating downgrade and unclear capital gain tax.
Sri Lanka on Friday postponed a plan to reintroduce capital gains tax by six months after the move threatened to dent foreign investor sentiment.
Stockbrokers said the concern now is how the government is going to impose the tax, rather than the tax itself.
Higher market interest rates and higher borrowing by the island nation facing a balance-of-payments crisis have also weighed on investor appetite for risky assets, dealers said.
The average weighted prime lending rate has risen 84 basis points to 9.19% since 19 February, when interest rates were increased by 50 basis points, Central Bank data showed.
Five-day rupee forwards edged higher on Tuesday as banks sold the dollar through exporters and inward remittances ahead of the Sinhala-Tamil New Year next week, dealers said.
The forwards, which are called spot next and act as a proxy for the spot currency, traded at 144.70/80 per dollar, firmer from Monday’s close of 146.10/20.
The State-owned bank sold dollars at 144.50 levels, likely on behalf of the Central Bank, to keep the rupee steady, dealers said.
The spot rupee, which has not been active since 27 January, did not actively trade. The Central Bank has fixed the spot rupee’s trading price at 143.90 through moral suasion, dealers said.
Central Bank officials were not available for comment.
“Now, the inflows are coming in for the festival season and the central bank is holding the rupee, the currency will be at these levels without much pressure,” a currency dealer said.
Sri Lanka will celebrate the Sinhala-Tamil New Year on 13 and 14 April.
The one-week forwards, which were hovering near record lows last week, also did not actively trade on Tuesday for the fourth straight session, the dealers said.
The rupee has been under pressure due to foreign investors exiting Government securities and amid the country’s economic woes.
Sri Lanka borrowed 25% more in 2015 than it did in 2014 due to high cost of refinancing loans raised by the previous Government without Parliamentary approval.
