Shares rise to over 1-week high; financials lead

Reuters: The share index rose for a second straight session on Friday, as retail investors bought financial stocks, but brokers said the rally will be short lived due to volatile global markets and rising returns in risk free assets.

The gains helped the index recover further lost ground from its lowest close in more than 20 months hit on Wednesday.

The main stock index ended 0.51% or 32.53 points up at 6,382.24, its highest close since 14 January.

It had lost 4.5% in a four-session losing streak through Wednesday as some investors sold their holdings to settle margin calls, while others switched to Treasury bills amid rising debt yields.

“We saw a bit of recovery today also. But I don’t think it’ll sustain. We are at a stage where the market is trying to consolidate, but it is difficult,” said Yohan Samarakkody, Head of Research, SC Securities Ltd.

Sri Lankan stocks have fallen over 7% so far this year as foreign investors, unnerved by global concerns over China’s economy, have cut their exposure.

Foreign investors were net sellers of Rs. 157.7 million ($1.1 million) worth of equities on Friday extending the year-to-date net foreign outflow to Rs. 2.27 billion.

The yield on one-year t-bills rose 32 basis points to a more than two-year high of 7.80% at a weekly auction on Wednesday. Analysts expect market interest rates to rise in tandem.

Some market analysts expect a rate hike in the Central Bank’s January monetary policy rate decision scheduled at 1400 GMT on Monday.

Shares in Commercial Bank of Ceylon Plc, the country’s biggest listed lender, rose 2.36%, while conglomerate John Keells Holdings Plc JKH.CM rose 0.83%.

Rupee steady on private banks’ dollar sales

Reuters: The rupee ended steady on Friday as dollar sales by two private banks helped offset demand for the greenback from importers, dealers said.

The private banks might have sold dollars on behalf of the Central Bank, some dealers said. Officials at the central bank were not available for comments.

The rupee ended at 144.00/20 per dollar, nearly flat from Thursday’s close of 144.00/10.

“There was demand for dollars from importers. But we saw two private banks selling dollars at 143.90 to prevent any further fall,” said a currency dealer, asking not to be named.

The dollar selling by one of the two private banks has prevented a fall in the local currency in the last few days, dealers said.

Some market analysts expect a rate hike in the Central Bank’s January monetary policy rate decision scheduled at 1400 GMT on Monday.

Many dealers said a 150-basis-point increase in commercial banks’ statutory reserve ratio with effect from 16 January had not eased the pressure on the currency as expected.

The yield on one-year T-bills rose 32 basis points to hover at more than two-year high of 7.80% at a weekly auction on Wednesday. Analysts expect market interest rates also to rise in tandem with T-bill yields.

Commercial banks parked Rs. 70.047 billion ($486.78 million) of surplus liquidity on Friday using the Central Bank’s deposit facility at 6%, official data showed.The Central Bank’s net holding of Government securities increased by Rs. 13.11 billion on Friday, official data showed.