Stocks dip to one-month low

Reuters: The stock market dipped slightly to close at a one-month low on Friday on concerns over rising interest rates and exchange rate volatility.

Colombo Stock Exchange’s main index fell 0.09% or 4.54 points to 4,867.52, its lowest since 13 June.

Analysts said the risk of higher interest rates has become investors’ main concern.

“In the short term, it is the biggest worry, though we expect rates to fall in medium to longer term once investor confidence picks up,” a stockbroker said.

Despite the Central Bank leaving key policy rates unchanged for the third straight month on Wednesday, yields in benchmark T-bills rose 9-14 basis points at a weekly auction to their highest since June 2009.

Some analysts expected the benchmark 364-day T-bill yield to reach 14.5% in the next two months from its current 13.10%, which may lead to a shift to fixed deposits from equities.

Turnover was Rs. 299.1 million ($ 2.24 million), against this year’s daily average of Rs. 937.3 million.

Foreign investors were net buyers of Rs. 81.2 million worth of shares, extending net foreign inflow so far this year to Rs. 23.8 billion, which analysts attributed to an almost 18% depreciation in the rupee since November.

The rupee, however, edged up on Friday to 133.80/85 against the dollar from Thursday’s close of 133.80/90 as banks’ dollar sales outpaced importer demand for greenbacks, dealers said.