Colombo Bourse loses Rs. 63 b in value, brings total to Rs. 98 b in four market days

Tuesday, 20 January 2015 01:16 - - {{hitsCtrl.values.hits}}

Fragile investor confidence, policy uncertainties and margin calls among major causes In an apparent sign of lacklustre confidence despite a strong and promising new Government, the Colombo stock market is continuing to lose value with yesterday’s toll at Rs. 63 billion increasing the four day tally to Rs. 98 billion. Most in the broking community are concerned though others expect the dip to continue as investor confidence is still fragile and partly due to margin calls. SC Securities described yesterday’s 147 points decline in All Share Index as “massive.” It said “investors were on the defensive” yesterday taking a cue from Friday. The main stock index “plunged almost 2%” amid panic selling by retail investors on policy uncertainties, noted Lanka Securities. It said the ASI sank to a two-week low of 7,366.68 recording drop of 147.18 points (-1.96%) which is the highest intra-day drop since 24 November 2014. Asia Securities noted that the Colombo Bourse experienced a steep fall as investors stepped up their selling spree, where counters across the board witnessed price dips. “Almost all the sectors incurred losses in their respective indices whilst the Construction and Engineering sector witnessed the highest dip of 7.2% as investor sentiment was dampened after the present Government began to revisit the viability of large-scale infrastructure projects initiated by the previous Government,” Asia Securities added. “The market dropped by 239.11 points in last four sessions and has now erased almost all of the 4% percent gains which it posted during the New Year,” Lanka Securities said. Market capitalisation on Friday was Rs. 3.2 trillion and it was down to Rs. 3.137 trillion. It has been down since 9 January on which it was Rs. Rs. 3.238 trillion. Yesterday’s fall was fuelled by declines in prices of top blue chips. “Price depreciation in large cap counters such as Commercial Bank (Rs. 180.00, -4.4%), John Keells Holdings (Rs. 237.00, -1.5%) and Sri Lanka Telecom (Rs. 50.50, -3.4%) affected adversely to the index performance. Additionally Distilleries dipped by 3.6% and Access Engineering by 11.3%. Lanka Securities also linked the sharp dip in Access Engineering (biggest contributor to turnover with Rs. 96 million) to reports pointing to the suspension of the northern expressway and the investors’ expectations on possible cancellation of orders given to construction companies. Losers surpassed the gainers 202 to 23 while 27 counters remained unvaried. Cash map declined to 31% from 45%. 13 counters dropped to 52-week low price levels while Ceylinco Insurance (closed at Rs. 1,500 +7.7%) and debutant Arpico Insurance reached a new high of Rs. 15.20, up by 8%. Turnover yesterday was at a two-week low of Rs. 860 million. Reuters reported that the index fell to a more than two-week low on Monday as political uncertainty and lack of clarity on projects started by the previous Government weighed on investor sentiment. Investors also awaited economic policies of the new Government, it added. “Political uncertainty is still prevailing. Margin calls may lead the market to fall tomorrow as well,” Reuters quoted Dimantha Mathew, manager of research at First Capital Equities Ltd. as saying. According to Reuters report, analysts said investors are concerned about political stability after new President Maithripala Sirisena announced an interim Cabinet last week he said would carry out reforms to fight corruption in the 100 days to a parliamentary election. The main focus of the new Government would be to introduce the democratic reforms it promised within the 100-day period, analysts said. Analysts said the market was closely monitoring the Government’s bureaucratic appointments to check if they were in line with its pledge of good governance and transparency, Reuters added. Foreign investors were net buyers for the second consecutive day with net inflow of Rs. 80 million. Foreign participation reached 17%. Net foreign inflows were seen in counters such as John Keells Holdings, People’s Leasing and Finance and Tokyo Cement while net foreign outflow was mainly seen in Commercial Bank.

Forex reserves down 6% in Nov-Dec amid rupee defence

Reuters: Foreign currency reserves fell 6% in the last two months of 2014, latest Central Bank data showed on Monday, with the decline resulting from suspected intervention to support a weakening rupee , according to traders. Foreign currency reserves declined by $474.33 million to $7.37 billion in the two months through December, the Central Bank data showed. “This is because the Central Bank was defending the currency heavily from depreciation,” a currency

dealer said on condition of anonymity. Others shared the same view. The Central Bank’s data showed it had sold a net $241 million to the market in November and December. The Central Bank, however, had been a net buyer of $544.25 million in 2014 due to foreign inflows from loans and into stocks in the first eight months of the year. A Central Bank official said net dollar sales were not only to defend the rupee, but also to meet payments. The Central Bank has intervened heavily through State-run banks to reduce market volatility and keep the currency steady, Central Bank officials have told Reuters.