Shares at over-5-week low on political woes, foreign selling

Reuters: Shares ended at their lowest in over five weeks on Wednesday led by financials as concerns over political uncertainty before a Parliament election dented sentiment, while foreign investors exited from risky assets.

The main stock index fell 0.64% to close at 7,149.46, its lowest finish since 28 April. 

The fall, for the third straight session, was the worst single-day loss since 30 March.

“Mainly it’s the political uncertainty,” said Dimantha Mathew, Research Manager at First Capital Equities Ltd. “Foreign selling was also seen. With the expected US interest rate hike, foreigners are expected to move funds out to the US.”

Foreign investors were net sellers of Rs. 72.3 million rupees ($ 539,955.19) worth of shares on Wednesday, extending the net foreign selling in the last six sessions to Rs. 1.53 billion. The bourse, however, has seen net inflows of Rs. 4.41 billion in equities so far this year.

Despite political uncertainty, stockbrokers said better corporate earnings would help the market gain in the future despite the Parliament election this year.

Turnover was Rs. 958 million, below this year’s daily average of about Rs. 1.13 billion.

Political uncertainty due to the Ranil Wickremesinghe-led Government not having a majority has been a drag on the market, though the trend reversed after the Central Bank cut key monetary policy rates to record lows on 15 April.

The index has gained 3.6% since the rate cut.

Shares in Sri Lanka Telecom Plc fell 1% while Lanka ORIX leasing Company Plc fell 3.7%, dragging the overall index.

Biggest listed lender Commercial Bank of Ceylon Plc fell 1.47%.

President Maithripala Sirisena’s Government has said it would dissolve Parliament once some crucial reform bills are passed, but it has not scheduled a date for the election.

Analysts say investors are hoping for a stable Government after the election coupled with strong economic measures would boost confidence.

Rupee forwards end up on exporter dlr sales, spot steady 

Reuters: Rupee forwards ended firmer on Wednesday as exporters sold dollars amid expectations of a further rise in the local currency while the spot currency was steady due to selling of the greenback by State-run banks, dealers said.

Three-month forwards, which were actively traded for the last few weeks in the absence of spot, closed at 135.90/136.30, firmer from Monday’s close of 136.80/137.10.

Both stock and currency markets were closed for a Buddhist religious holiday on Tuesday.

The spot rupee closed steady at 133.90 per dollar as a State-run bank, through which the Central Bank usually directs the market, sold dollars at 133.90, dealers said.

Dealers said the pressure on the rupee might ease when expected inflows come in.

“At the moment, the perception on the rupee fall has reversed and the market expect it to appreciate in the short run. But it depends on dollar inflows in the future,” a currency dealer said asking not to be named.

On Monday, the spot currency started to trade after nearly six months after the island nation raised nearly $ 1 billion from bond sales the previous week.

Sri Lanka raised $650 million on Thursday by selling an international sovereign bond and $388 million from development bonds.

Finance Minister Ravi Karunanayake said on Friday the country would see further inflows from some international banks, while Central Bank Governor Arjuna Mahendran said the depreciation pressure on the rupee was due to a stronger dollar.

Dealers said exporters may start selling dollars as inflows from the dollar bond would help boost the rupee.

The Central Bank, with effect from Monday, imposed a 5% penalty on exporters who hold dollars for more than 90 days, and a monthly 2% penalty thereafter, currency dealers said.

Exporters have been holding dollars without converting them into the local currency as it has become cheaper to manage costs with rupee loans in a lower interest rate environment.

The Central Bank has allowed the spot to fall 0.75%, or by Re. 1, since 30 April to account for broad gains in the dollar and rising credit demand.