Global, local woes drag stocks down to six-week low

Reuters: Sri Lanka’s stock market fell for a third session to a more-than six-week low on Thursday, following Asian peers on a gloomy global economic outlook, a local liquidity shortage and forced selling to meet margin debt reductions.

The island nation’s main share index closed 0.45 per cent or 30.50 points weaker at 6,762.38, its lowest since 9 August. It is still Asia’s best performer with a return of 1.91 per cent on the year.

The bourse witnessed a foreign outflow of Rs. 610.6 million on Thursday, the highest since 7 September, and thus far in 2011, offshore investors have sold 16.5 billion after a record 26.4 billion in 2010.

“Global and local centres brought the market down,” said a stockbroker, asking not to be named.

On Thursday global stocks were tumbling and drove investors into safer currencies and Government bonds due to the grim outlook for the US economy from the Federal Reserve and signs of a slowing in China and Germany.

Analysts said investors were concerned the International Monetary Fund had not set a timeframe for a review of Sri Lanka’s progress under a $ 2.6 billion loan, the precursor to disbursement of the programme’s eighth tranche.

The oil palms and pharmaceuticals sectors pushed the market down with losers outperforming gainers by 135 to 73, Thomson Reuters data showed.

The day’s turnover was Rs. 1.9 billion ($17.2 million), less than last year’s average of 2.4 billion and this year’s 2.7.

Lanka Orix Finance Company Plc (Rs. 625 m) was the top contributor to the turnover followed by Regnis Plc (Rs. 218.7 m) and Radian Gems Plc (Rs. 61.7 m). Lanka Orix Finance Plc recorded an off-the-floor deal of 52 m shares at a price of Rs. 12.

Meanwhile, aggressive levels of trading were witnessed in Regnis Plc, The Finance Plc and Radiant Gems Plc.

Foreign participation was high at 20.9% of the total market activity. At the end of the day foreign investors were the net sellers with a net foreign outflow of Rs. 610.6 m.

Thursday’s total volume was 114.8 million, against a five-day average of 155.1 million. The 30-day and 90-day average trading volumes were 163.6 million and 143.1 million. Last year’s daily average was 67.9 million.

The rupee closed weaker at 110.29/110.30 a dollar from Wednesday’s close of 110.18/20 on severe importer dollar demand with the Central Bank raising the dollar trading band by 10 cents to 109.80/110.30 from 109.70/110.20, dealers said.

The Central Bank mopped up 22.37 billion rupees from the market on Thursday through a repo auction at 7.08 per cent.