Stock market starts 2017 on negative note

Reuters: Sri Lankan shares fell on the first trading day of 2017 as investors sold market heavyweight John Keells Holdings Plc and other blue chips amid worries over a weakening rupee and rising interest rates. 

Conglomerate John Keells Holdings Plc fell 3.5% and accounted for 67.6% of Monday’s turnover of Rs. 329.2 million.

The Colombo stock index closed down 0.6% at 6,192.87. The bourse fell 9.7% in 2016, its second straight annual decline.

“Investors are selling Keells because a high net worth investor sold large quantities. So investors sold the shares on speculation that Keells will fall further,” a stockbroker said, asking not to be named. 

“There has been some foreign selling in Keells in the last month as well.” 

In dollar terms, Sri Lanka’s stock market fell 13% in 2016, making it a worse performer than emerging Asian markets like Malaysia, Thailand, Indonesia and Singapore.

Stockbrokers said Sri Lanka’s failure to attract foreign direct investments and lack of investor confidence due to a reversal in some budget policies weighed on the market and on the rupee, which fell 3.9% in 2016 and remains weak. 

The Central Bank on Friday kept its benchmark interest rates steady for a fifth straight month as expected, saying credit growth was responding to earlier tightening measures. Government borrowing costs, however, are rising as the recent increase in US interest rates raises the risk of capital outflows from emerging markets such as Sri Lanka, adding pressure on the rupee.

Foreign investors sold a net Rs. 26.4 million of equities on Monday. 

Shares in Trans Asia Hotel Plc dropped 12.1% while Sri Lanka Telecom Plc fell 2.8% and shares in Commercial Bank of Ceylon Plc slipped 1.2%.