Stock market hits 7-month low; rupee flat

Saturday, 23 July 2011 00:51 - - {{hitsCtrl.values.hits}}

Sri Lanka’s stock market fell to a seven-month low on Friday and deeper into negative territory as investors sold large-cap shares, foreign investors kept selling out and month-end margin settlements all weighed.

The main share index fell 2 percent or 131.68 points in early trade and closed 0.94 percent or 61.72 points weaker at 6,537.25, the lowest since 23 December.

The bourse, Asia’s best performer for the last two years, had gained since the beginning of 2009 when Sri Lanka’s 25-year war was nearing its end. It returned 124 percent in 2009 and 96 percent in 2010. But it is down 1.49 percent so far this year.

Foreign investors were net sellers of 86.5 million rupees worth of shares on Friday, bringing the total outflow to 571.2 million this week. They have sold 7.71 billion rupees in 2011 after a record outflow of 26.4 billion in 2010.

The market fell 3.07 percent this week, despite improving macroeconomic fundamentals which sparked a sovereign rating upgrade this week, bolstering the sale of a $1 billion, 10-year sovereign bond on Wednesday.

Since 1 June, the index has shed 11.5 percent, mainly due to forced selling in line with the policy of Sri Lanka’s Securities and Exchange Commission (SEC) to eliminate margin trading by year’s end.

The day’s turnover was 1.34 billion Sri Lanka rupees ($12.2 million) well below last year’s average of 2.4 billion and this year’s 2.71 billion.

Traded volume was 76.8 million against a five-day average of 58.7 million. The 30-day and 90-day average trading volumes were 120.2 million and 103 million, respectively. Last year’s daily average was 67.9 million.

The rupee ended steady at 109.49/50 a dollar for a sixth straight day as a state bank, through which the Central Bank directs the market, continued selling dollars at 109.50 despite heavy importer demand, dealers said.

(Reuters)