Bourse falls for fifth session in six

Reuters: Shares closed lower on Tuesday, marking their fifth session of decline in six, although foreign investors continued to buy stocks.

Domestic investors were concerned about a possible increase in interest rate, analysts said, after the International Monetary Fund said further monetary policy tightening in Sri Lanka was desirable until there were clear signs that inflationary pressures were subsiding.

Foreign investors were net buyers of shares worth Rs. 658.9 million ($ 4.3 million) on Monday, extending the year-to-date net foreign inflow to Rs. 24.3 billion worth of equities.

The Colombo stock index ended 0.09% lower at 6,735.04, marking a second straight losing session.

“The turnover was good and there was a huge interest in select shares,” said Prashan Fernando, CEO at Acuity Stockbrokers.

Turnover was Rs. 1.25 billion, more than this year’s daily average of Rs. 913.4 million.

Shares of large cap Ceylinco Insurance fell 7.35%, while Ceylon Tobacco Company edged down 0.8%.

Rupee falls on importer dollar demand

Reuters: The rupee fell on Tuesday on light importer dollar demand, even as the International Monetary Fund (IMF) called for more monetary policy tightening and measures to curb strong credit growth.

Further monetary policy tightening “is desirable” until there are clear signs that inflationary pressures are subsiding, the IMF said in a statement before markets opened on Tuesday.

The global lender, which completed its second review of a $ 1.5 billion loan approved in May last year, said Sri Lanka’s performance under its program has been “broadly satisfactory”.

The completion of the second review will enable the IMF to release a third tranche of aid of about $ 167.2 million, bringing total disbursements under the arrangement to the equivalent of about $ 501.5 million.

The spot rupee closed at 153.75/80 per dollar, compared with Monday’s close of 153.70/73.

“The expected IMF disbursement failed to boost the market. There was some importer (dollar) demand,” a currency dealer said asking not to be named.

Analysts expect the currency to depreciate 4% this year. It has already fallen 2.6% so far in 2017.

Central Bank Governor Indrajit Coomaraswamy said on Monday the rupee was still “over-valued” and that the Central Bank was still buying dollars to avoid any appreciation.

He told Reuters that the Central Bank had bought dollars in the range of $ 750 million-$ 800 million from the market, out of the $ 1.2 billion it had planned to purchase in the 10 months from March this year.

The Central Bank is compelled to buy dollars from the market to meet a reserves target set by the IMF under a $ 1.5 billion, three-year loan program.

Seasonal demand for dollars is expected to pick up from August, dealers said.