Bourse slips from near 3-year high on profit-taking, foreign outflow

Saturday, 2 August 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Stocks ended a tad weaker on Friday, snapping a four-day winning streak as investors booked profits in large-cap shares as foreigners exited risky assets ahead of a key US jobs report. The main stock index ended 0.06%, or 3.77 points, weaker at 6,810.13, slipping from its highest close since 20 September 2011 hit on Thursday. It rose 6.82% in July. The Bourse is up 15.18% so far this year. Expectation of strong corporate earnings, declining interest rates and continued foreign buying have helped boost buying risky assets in the country’s $21.93 billion-worth stock market. “A bit of profit-taking and the global worries dragged down the market,” a stockbroker said on condition of anonymity. Global shares fell on Friday and the euro eased against the dollar, hit by weak euro zone manufacturing data and nerves ahead of a key US jobs report. Analysts said the market will wait and see how foreign investors will react to the global situation and that earnings hopes could still drive the market with lower interest rates. Foreign investors were net sellers for the first time in eight sessions. They have sold Rs. 77.9 million ($598,300) worth of shares on Friday, but have been net buyers of Rs. 10.89 billion so far this year. Turnover was Rs. 775 million, less than this year’s daily average of about Rs. 1.09 billion. The index has been in the overbought region since 3 July, as local investors moved funds from fixed income to riskier assets because of low interest rates and foreign buying. Losses were led by large-cap share Ceylon Tobacco Company Plc which fell 1.54% to Rs. 1,130.60 while Lion Brewery (Ceylon) Plc fell 2.33% to Rs. 625. Lower interest rates have prompted local investors to buy shares and move away from unattractive fixed assets, analysts said. Yields on Treasury bills edged down further by seven to 10 basis points at a weekly auction on Wednesday. The International Monetary Fund urged Sri Lanka on Wednesday to keep key interest rates on hold for the near term and said a cautious approach is warranted.

Rupee ends little changed; seen gaining further

Reuters: The rupee ended little changed on Friday, but dealers expect the currency to strengthen further due to lack of strong private credit growth and importer dollar demand amid investors pricing in another policy rate cut in the near future, dealers said. The rupee closed at 130.21/24 per dollar, compared to Thursday’s close of 130.21/22. “We see rupee further strengthening in the absence of private sector credit and on import demand,” a currency dealer said. The dealer said yield on one-year Treasury bill has now fallen to slightly less than the central bank’s repurchase rate in the secondary market. “I think investors are pricing in another rate cut in the near future,” he said. Dealers said the Central Bank’s dollar buying from the market has increased rupee liquidity and sent yields on government securities lower amid lack of strong demand for private credit and imports. The Central Bank has absorbed more than $750 million from the market to prevent a sharp appreciation in the rupee and support exporters. Dealers said the two State banks bought dollars at 130.21 rupees for imports amid inflows from remittances and exporter dollar sales. The International Monetary Fund (IMF) on Wednesday urged Sri Lanka to limit its intervention in the foreign exchange market. The IMF said the Central Bank’s intervention may create a perception that the rupee was implicitly fixed and could lead market participants and firms to hold un-hedged foreign exchange risk on their balance sheets. Finance Secretary P.B. Jayasundera said last week that Sri Lanka was building up its foreign exchange reserves while keeping its currency stable as the island nation sees more dollar inflows.