Shares gain over 1.2% after IMF statement

Reuters: Shares jumped over 1.2% on Tuesday as local investors bought risky assets, after an International Monetary Fund statement said a three-year loan program is expected to conclude in two weeks, dealers said.

Sri Lanka has requested for an IMF loan to help weather a looming balance of payments crisis.

The benchmark stock index rose 1.24% to close at 6,353.20, its highest close since 10 February.

“The IMF loan is seen as a positive factor,” said Dimantha Mathew, Head of Research, First Capital Equities Ltd.

“However, this gain is unsustainable given the higher interest rates. Until the IMF money comes in, probably by June, the Government’s borrowing requirement is going to be high, so the interest rates are also going to be high.”

Sri Lanka will stop excess Government borrowing in a bid to get out of a debt trap and it hopes for cheaper loans after a deal with the IMF is finalised, its Central Bank Chief said on Tuesday.

Analysts stated that a move to reintroduce Share Transaction Levy, which the market believes is in place of proposed Capital Gains Tax, will help boost the sentiment.

Turnover stood at Rs. 755.2 million, just below this year’s daily average of Rs. 790.7 million.

Foreign investors sold a net Rs. 31.3 million ($215,209.02) worth equities, extending the year-to-date net foreign outflow to Rs. 3.25 billion.

Rising interest rates and higher borrowing by the island nation facing a balance-of-payments crisis have weighed on investor appetite, dealers said.

Analysts and economists worry that slow growth could reduce corporate earnings of a few listed firms.

Conglomerate John Keells Holdings PLC and Hemas Holdings PLC gained 1.8 and 7% respectively.

The market will be closed for Sinhala-Tamil New Year on Wednesday and Thursday. Trading will resume on Friday.