CSE falls to near 5-year closing low on foreign selling

Reuters: Shares fell over 1% yesterday to their lowest close in nearly five years, as foreign investor selling, a weaker rupee and government plans to curb imports hurt investor sentiment.

Prime Minister Ranil Wickremesinghe said on Monday the government would take measures to impose taxes to curb imports by $ 500 million to $ 1 billion to face the currency crisis. The rupee hit a record low for an eighth straight session on Friday despite the central bank’s intervention. It fell to an all-time low of 169.00 per dollar on Friday, weighed down by importer demand for the scarce US currency.

The rupee has weakened 4.5% so far this month after a 1.2% drop last month, and has declined 9.97% so far this year.

Analysts said the acceleration in the rupee’s depreciation was creating panic among investors.

The Colombo stock index declined 1.21% to 5,833.58 on Tuesday, its lowest close since 18 December 2013. This was also the sharpest single-day drop since late November 2017.

“It’s another disastrous day, lots of exits happened. It’s mainly because of panic selling, that’s why the market came down sharply in lower turnover,” said Dimantha Mathew, head of research at broker First Capital Holdings.

Turnover was Rs. 297.6 million ($ 1.77 million), the lowest since 6 September, and less than half of this year’s daily average of Rs. 793.5 million.

Foreign investors sold a net Rs. 60.9 million worth of shares on Tuesday, extending the year-to-date net foreign outflow to Rs. 5.6 billion worth of equities.

Analysts said the recent fuel price hike also hurt investor confidence as it could hit corporate earnings. Fuel retailers raised gasoline and diesel prices earlier this month for a third time in four months due to higher global oil prices and a weaker rupee.

Investors are awaiting cues from the national budget in November.

Shares of Ceylon Tobacco Company Plc fell 1.5%, Hemas Holdings Plc lost 4.3%, Sri Lanka Telecom Plc ended 5.7% down and conglomerate John Keells Holdings Plc closed 1.1% lower.