Stock market posts 5-week closing low on rising interest rates

Reuters:  Shares edged down on Thursday, posting their lowest close in nearly five weeks, as rising interest rates weighed on risky assets, while lack of new catalysts also dented sentiment.

Treasury bill yields rose between 4 and 35 basis points to near three-year highs in two weekly auctions through Wednesday despite the Central Bank leaving key policy rates steady for a third straight month on 20 May.

The benchmark Colombo stock index ended 0.29 %, or 18.91 points, weaker at 6,523.84, its lowest close since 29 April. It has fallen 0.72 % in the four sessions through Thursday after declining 0.94 % last week.

“There is no market-moving news and the market is moving news,” a stockbroker said.

Stockbrokers said a rise in interest rates could be detrimental to risky assets if they jumped beyond 12 %.  The average prime lending rate (AWPR) edged up 15 basis points to 10.15 %  in the week ended 27 May.

Analysts said market sentiment remained weak as investors were waiting for catalysts such as a big foreign direct investment or initial public offering or inflows from the International Monetary Fund (IMF).

Investors are also concerned about foreign investment outflows, they added, with overseas investors offloading a net Rs. 5.59 billion($37.68 million) worth of equities so far this year. Foreign investors bought shares worth a net Rs. 26.1 million on Thursday.

Turnover stood at Rs. 671.9 million, well below this year’s daily average of around Rs. 791.9 million.

Shares in Nestle Lanka Plc fell 1.95 %, while those in Bukit Darah dropped 5.31 %.