Stocks at over five-month low on margin calls, low liquidity

Reuters: Sri Lanka’s stock market on Tuesday fell below 7,000 for the first time since January in low turnover and volumes due to sustained selling across the board weighed down by lack of liquidity and margin calls. The rupee, meanwhile, ended tad weaker owing to importer dollar demand.

Sri Lanka’s main share index edged down 0.63 per cent, or 44.04 points, to 6,996.64, its lowest since 11 January, Reuters data showed.



“Selling pressure witnessed across the board. Investor interest mostly witnessed in speculative stocks,” said NDB Stockbrokers in a note.

Analysts said forced selling by brokers continued on Tuesday as well to recover credits in line with the policy of the regulator Securities and Exchange Commission (SEC).

Over Rs. 6 billion has been locked in the recent Initial Public Offerings by conglomerate ExpoLanka Holdings, which started trading on 13 June, and Softlogic Holdings, which is yet to start trading on the stock exchange, bourse data showed.

Foreign investors were net buyers of Rs. 34 million worth of shares on Tuesday and they have sold a net Rs. 6.25 billion worth shares in 2011 after a record 26.4 billion in 2010.

On Tuesday, SEC said it planned to introduce a central counterparty system for share trading to minimise default risk, along with international board and dual listings to boost foreign interest in local stocks.

The day’s turnover was Rs. 1.67 billion ($ 15.3 million), the lowest since 13 May, and well below last year’s average of 2.4 billion and this year’s daily average of 2.91 billion.

Traded volume was 126.8 million, against a five-day average of 175.6 million. The 30-day and 90-day average trading volumes were 183.1 million and 105.7 million, respectively. Last year’s daily average was 67.9 million.

The bourse is still Asia’s best performer in 2011 with a 5.4 per cent gain, after bringing in the region’s top return of 96 per cent last year.

The rupee closed a tad weaker at 109.57/60 a dollar from Monday’s 109.56/60 on importer dollar demand amid a State bank selling dollar at a flat rate of 109.60, dealers said. It hit a 31-month high of 109.30 a dollar on 9 June, its highest since 30 October 2008, Reuters data showed. On Friday the Central Bank said it would maintain the currency steady with little volatility.