Bourse slide continues

The Colombo stock market inched lower in thin holiday trade yesterday, with investors waiting for direction on credit limits from the new Chief of the Securities and Exchange Commission and the year-end doldrums weighing on sentiment.

The main share index extended its losing streak for a sixth straight session, with turnover slumping to a two-year low, due to lack of credit in the market to support buying and as big investors wound up their books for the year. A credit limit imposed by the SEC has dragged on the market along with a three per cent currency devaluation and resignation of its Head and Deputy.                                       



Investors are waiting for the new SEC Head to provide direction on the credit limit, but that is not expected until next year.

Last month brokers, who complained that tougher regulation was hurting stock market prices, met President Mahinda Rajapaksa to urge him to intervene in his capacity as Finance Minister to revive the slumping Colombo Stock Exchange.

On Wednesday the main share index edged down 0.16 per cent or 9.11 points to 5,842.83, lowest since 25 November.

The day’s turnover was Rs. 375.9 million ($ 3.30 million), the lowest since 14 December 2009, and well below last year’s average of 2.4 billion and this year’s 2.3 billion.

Total volume was 13.8 million shares, hovering near one-month low and against a five-day average of 17.1 million.

The 30-day and 90-day average trading volumes were 46.8 million and 91.9 million. Last year’s daily average was 67.9 million.

Since 1 October, the bourse has fallen 13.7 per cent.

On Tuesday Colombo Stockbrokers Association welcomed a Central Bank move over the weekend to rescind an order that limited banks to extending a maximum of five per cent of outstanding loans to margin trading and said it could inject billions of rupees by way of margin trading funds to the stock market. But investors had so far shrugged off the move due to the year-end as most of them were on holidays.

The bourse saw a net foreign inflow of 86 million rupees on Wednesday with offshore investors buying 499,000 shares in John Keells Holdings on a net basis, but foreigners have sold 18.1 billion thus far in 2011, and a record 26.4 billion in 2010.

Shares in John Keells Holdings rose 1.6 per cent to 170 rupees. The Colombo Stock Exchange has fallen to Asia’s 13th-best performer with a year-to-date loss of 11.9 per cent after being at the top until June. It delivered Asia’s best returns in 2009 and 2010.

The rupee closed flat at 113.89/90 rupees a dollar for a 21st day in dull trade with the Central Bank selling more than $ 5 million to defend it, dealers said.

The Central Bank on Tuesday said it could continue to maintain the rupee exchange by selling dollars from the foreign reserves as it expected large dollar inflows in the coming months.

The bank has spent around $ 515 million to keep the exchange rate steady since a three per cent devaluation on 21 November. It spent almost $ 2 billion this year until the end of September holding back depreciation pressure.