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In less than a month net foreign selling at the Colombo Stock Market has surpassed the Rs. 6 billion mark, renewing concerns among analysts that Sri Lanka is increasingly being overlooked largely owing to macro concerns.
On Wednesday, net foreign selling was Rs. 1.3 billion, which First Capital said was the highest figure after nearly 37 weeks.
This saw year to date net foreign selling amount to Rs. 6.18 billion.
Asia Securities said the estimated net foreign selling topped in John Keells Holdings (JKH) at Rs. 612 million. LB Finance also saw Rs. 509.6 million (1.6 million shares) in net selling followed by Royal Ceramics (Rs. 228.4 million).
The main seller of LB Finance on Wednesday was SBI Ven Holdings Pte Ltd which held 1.6 million shares or 1.15%. Following the share split move of 1 into 4 LB Finance share price shot up by Rs. 88 or 38% to close at Rs. 320.50. Overall 2.6 million shares changed hands via 2,076 trades for Rs. 689.68 million.
On Wednesday net foreign buying topped in Expolanka Holdings Plc at Rs. 59 million.
According to Acuity Stockbrokers, foreign net selling last week was Rs. 2.36 billion as against Rs. 615 million in the previous week.
Exit by foreigners is despite the All Share Price Index (ASPI) being up 30% so far in the new year and the more active S&PSL20 Index higher by 33%.
The influential news agency Bloomberg on Wednesday reported that world’s best stock rally is happening in Sri Lanka.
“As the pandemic rebound got underway, abundance of global liquidity, substantial rate cuts and domestic retail participation have helped fuel the rally,” Joshua Crabb, a Hong Kong-based money manager at Robeco, was quoted as saying by Bloomberg. “Keep in mind the currency has also weakened, which makes exports more competitive, encourages tourism and introduces inflation, which helps nominal assets like equities.”
Bloomberg said the March (2020) selloff saw the CSE All Share Index plunge 32% as a dearth in tourism, increased political uncertainty and concerns about debt sustainability weighed on risk appetite. Since then, the central bank cut its key rate by 200 basis points and provided liquidity, helping the island nation beat a recession. The country has even reopened its airports for international tourism. Equities have now more than doubled to records from their 2020 lows, and trading volume on the Colombo Stock Exchange hit a record $77 million this week.
After the rapid rally, Crabb says stocks may be due for a pause.
“In the near term, I would expect the market to consolidate its gains,” he said. “At current valuations, we really need to see an improvement in the economy and in company earnings to see another leg up.”
In 2020, net foreign selling amounted to Rs. 51 billion, with Rs. 11 billion of net selling in the fourth quarter. In 2019, net foreign selling was only Rs. 13 billion.
