Reuters: Shares hit a two-week closing high on Tuesday as investors picked up blue chip shares such as John Keells Holdings Plc and Ceylon Tobacco Company Plc, brokers said.

The Colombo stock index ended 0.17% firmer at 6,148.94, its highest close since 23 January.

“Bargain hunting in blue chips is continuing. There was some block trades too,” said Dimantha Mathew, head of research at First Capital Equities Ltd.

Shares of John Keells Holdings Plc rose 1.01%, while Ceylon Tobacco Company Plc rose 0.59%.

Turnover stood at Rs. 548.9 million ($ 3.65 million), more than this year’s daily average of Rs. 623.3 million.

Foreign investors net bought Rs. 58.2 million worth of equities on Tuesday. They have net sold Rs. 313.1 million worth of shares so far this year.

On Thursday, Fitch Ratings affirmed Sri Lanka’s Long-Term Foreign- and Local Currency Issuer Default Ratings (IDR) at ‘B+’ and revised the outlook to ‘stable’ from ‘negative’.

Sri Lankan stocks have been hit by political uncertainty after ruling coalition parties decided to contest local polls separately, and on worries over a rise in interest rates.

Last week, the country’s central bank kept key rates steady for a sixth straight month, but flagged possible “corrective measures” in the months ahead in a sign further tightening might be on the cards to temper inflation pressures and safeguard a fragile rupee.

Yields on treasury bills are hovering at a more than four-year high.

Rupee edges up on exporter dollar sales

Reuters: The rupee firmed on Tuesday as dollar sales by exporters offset demand for the US currency although depreciation concerns continued to weigh, dealers said.

Rupee forwards were active, with two-week forwards closing at 151.15/25 per dollar, firmer from Monday’s close of 151.20/25.

“Some local banks are on the (dollar) selling side,” said a currency dealer, requesting not to be named.

“We haven’t seen foreigners selling and it may be also a reason for the easing pressure. But today, there was a dividend payment by a foreign bank.”

Dealers said the market has factored in a gradual depreciation risk for the rupee and it expects a 4-5% fall in the currency this year, unlike the sharp depreciation seen in the the past.

The rupee fell 3.9% last year, following a 10% drop in 2015.

The Central Bank has allowed the currency to gradually depreciate since mid-December, revising its spot reference rate multiple times.

Sri Lanka’s central bank governor, Indrajit Coomaraswamy, said last week the bank was not planning to abruptly stop supporting the rupee.

The rupee has weakened 0.7% so far this year, under pressure due to rising imports and net selling of government securities by foreign investors.

The Central Bank has said that defending the currency with foreign exchange reserves does not “seem sensible”.

The Central Bank kept its key rates steady last week for a sixth straight month, but flagged possible “corrective measures” in the months ahead in a sign that further tightening might be on the cards to temper inflation pressures and safeguard a fragile rupee.

Foreign investors net sold Rs. 31.38 billion ($ 208.30 million) worth of government securities in the four weeks to 8 February, according to the latest Central Bank data.