Stock market falls on foreign selling amid political uncertainties

Reuters: Sri Lankan shares fell on Tuesday to end near a 10-month low as foreign investors sold equities amid political instability and on worries of further interest rate hikes, brokers said.

While investors turned cautious after the government’s coalition partners decided to contest local polls separately, a rise in Treasury bill yields last week also affected risk appetite, said analysts.

Yields on treasury bills rose 2-5 basis points at a weekly auction on Wednesday to a near five-month high after the central bank governor signalled reduced intervention to defend the rupee.Rising interest rates, which move in tandem with T-bill yields, have been a cause for concern, brokers said.

The Colombo stock index ended 0.13% down at 6,132.68, near its 10-month closing low hit last week, its second straight weekly decline.

“Big chunk of today’s trade was foreign-to-foreign transaction. Other than that, there was no major activity as most of the investors are on the sidelines, awaiting direction,” said Dimantha Mathew, Head of Research at First Capital Equities Ltd.

Turnover stood at Rs. 1.65 billion, the highest since 28 December.

Foreign trading accounted for 67% of the day’s turnover, as foreign investors net sold Rs. 20.77 million worth of equities on Tuesday, extending the year-to-date net foreign outflow to Rs. 1.65 billion worth of shares.

Shares in Colombo Cold Stores Plc fell 1% while Ceylon Tobacco Company Plc fell 0.33%.

Rupee falls as CB revises spot ref rate to record low

Reuters: The Sri Lankan rupee ended weaker on Tuesday as the Central Bank adjusted the spot currency reference rate to a record low amid foreign outflows from government securities, dealers said.

Dealers said the Central Bank revised the spot rupee reference rate to 150.50 on Tuesday from 150.25.

“There was demand from foreign selling in government securities,” a currency dealer said, requesting anonymity.

“There were some inflows too...could have been exporter conversions or inward remittances,” the dealer added.

Dealers said rupee forwards were active, with two-week forwards ending steady at 151.00/10 per dollar after it traded at 151.10/20 during the day.

The rupee will also face depreciation pressure due to seasonal importer dollar demand, dealers said.

The rupee has been under pressure due to rising imports and net selling of government securities by foreign investors, while the Central Bank has said defending the currency was not sensible.

Foreign investors net sold Rs. 21.1 billion ($ 140.6 million) worth of government securities in the three weeks to 25 January, according to latest Central Bank data.