Stocks fall for 10th day on sectarian violence concerns

Thursday, 16 May 2019 00:00 - - {{hitsCtrl.values.hits}}

REUTERS: Shares fell for the 10th straight session on Wednesday and closed at their lowest in nearly seven years, as sectarian violence dented investor sentiment, while the rupee edged higher after four straight sessions of losses.

Police arrested more than 74 people in connection with a spate of attacks on Muslim-owned homes and shops in apparent reprisal for the Easter bombings that killed more than 250 people.

Sri Lanka’s economic growth is expected to slump to its lowest in nearly two decades this year, a Reuters poll showed. Tourism, foreign investment and overall business activity have all dropped after the bombings.

The benchmark stock index ended 0.45% weaker on Wednesday at 5,199.98, its lowest close since 30 August 2012. Turnover was Rs. 388.6 million ($2.21 million), less than this year’s daily average of around Rs. 555.9 million. Last year’s daily average was Rs. 834 million.

Foreign investors sold a net Rs. 165.4 million worth of shares on Wednesday, extending the year to date net foreign outflow to Rs. 4.4 billion worth of equities so far this year. The rupee closed slightly firmer on dollar selling by exporters and banks. The rupee gained 0.3% to close at 176.20/40 per dollar, compared with Tuesday’s close of 176.75/90, market sources said. Analysts expect the currency to weaken as money flows out of stocks and government securities.

The rupee gained 0.6% last week and is up 3.6% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia.

Foreign investors sold a net Rs. 10.8 billion worth of government securities in the week ended 8 May, extending net foreign outflow to Rs. 20.8 billion so far this year, Central Bank data showed.

Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved Parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds.