Bourse slips on rising rates, policy inaction

Reuters: Stocks fell for a fourth straight session on Wednesday to a two-week low on concern over rising interest rates and the absence of promised Government measures aimed at boosting the market.

The Colombo Stock Exchange’s main index lost 0.17 percent, or 8.35 points, to end at 4,889.87, its lowest since 26 July.

“Local investors are still on the sidelines as interest rates are on the rise. But there was selective foreign buying,” a stockbroker said on condition of anonymity. “Until interest rates come down, we will see the same trend.”



Even though the Central Bank has kept its policy rates steady for the past four months, it has allowed yields on Treasury bills to increase 132-186 basis points, making fixed-income instruments more attractive compared with equities.

T-bill yields edged up again at an auction on Wednesday despite a Central Bank decision the previous day to hold key policy rates steady for a fourth month.

Analysts said that the lack of positive news after waiting almost a week for promised measures to boost the Bourse, including more retail credit, was also a drag on trade.

Treasury Secretary Dr. P.B. Jayasundera made the promise last week in what was seen as an effort to revive the stock market which has fallen 19.5 per cent this year.

The day’s turnover slumped to a one-month low of Rs. 159.6 million ($ 1.21 million), well below this year’s daily average of Rs. 880.4 million.

Foreign investors were net buyers for a 13th straight session, picking up a net Rs. 24.6 million worth of shares, extending the net foreign inflow this year to Rs. 26.05 billion.

The rupee closed steady at 131.95/132 for a fourth straight session in dull trade, dealers said.