Stock market gains on large caps; volume slumps

Tuesday, 2 February 2016 00:02 - - {{hitsCtrl.values.hits}}

Reuters - Sri Lankan shares rose for a third straight session on Monday to end at their highest in more than a week led by large-caps, but trading volume slumped to a more-than-one-month low.

The main stock index ended 0.36 % higher at 6,363.18, the highest close since Jan. 22.

The index has fallen 7.7 % so far this year as foreign investors, unnerved by global concerns over China’s economy, cut their exposure.

“Market is moving up slowly in low volumes. I think market can move up a bit with the earnings,” said First Capital Equities (Pvt) Ltd Research Manager Dimantha Mathew.

Turnover was Rs. 273.3 million , the lowest since 30 December, and well below this year’s daily average of Rs. 724.5 million.

The 14-day relative strength index (RSI) returned to the neutral zone from oversold territory after three successive sessions of gains, Thomson Reuters data showed.

Foreign investors sold a net Rs. 27.9 million ($193,817) worth of shares on Monday, extending the year-to-date net foreign outflow to Rs. 2.77 billion worth of equities.

The Central Bank rejected all bids at an auction on Wednesday, signalling it would not tolerate much increase in yields after the yield on the 364-day t-bill jumped 32 basis points to a more-than-two-year high of 7.80 % last week.

The move could help investors return to the market, analysts said.

Shares of market heavyweight John Keells Holdings Plc rose 2.13 % and biggest listed lender Commercial Bank Ceylon Plc gained 2.28 %, while Hemas Holdings Plc advanced 2.13 %.

Rupee forwards edge down on importer dollar demand

Reuters: The rupee forwards ended marginally weaker on Monday due to importer dollar demand while selling of the greenback by a foreign bank capped further weakening of the local currency, dealers said.

The spot rupee was not traded as banks were reluctant to trade it below 144.00 levels amid moral suasion by the Central Bank. Central Bank officials were not available for comments.

Dealers said the one-week forward, which acted as a proxy for the spot currency, ended at 144.40/45 per dollar, compared with Friday’s close of 144.30/40.

“The (importer) demand was there. But the pressure eased with remittance to a foreign bank,” said a dealer asking not to be named.

Central Bank officials were not available for comments.

The rupee is under pressure despite a 150-basis-point increase in commercial banks’ statutory reserve ratio from 16 January. The Central Bank kept its key policy interest rates unchanged last week.

Commercial banks parked Rs. 40.057 billion ($ 278.27 million) of surplus liquidity on Monday using the Central Bank’s deposit facility at 6%, official data showed.

Secondary market bond yields continue to rise ahead of weekly bill auction

By Wealth Trust Securities

The secondary bond market yields continued to increase yesterday mainly on the long end of the yield curve as selling interest on the liquid maturities of 1 June 2026 and 15 May 2030 saw its yields hit intraday highs of 11.10% and 11.40% respectively against its days opening lows of 11.05% and 11.25%.

In addition the maturities of 1 August 2021 and 1 August 2025 were seen changing hands within the range of 10.39% to 10.41% DFT-9-04 and 10.84% to 10.86% respectively while on the short end of the curve the 1 April 2016 maturity was seen changing hands within the range of 6.90% to 7.00% as well.

This was ahead of today’s Treasury bill auction, conducted a day earlier due to a shortened trading week where an total amount of Rs.22 billion will be on offer consisting of Rs.3 billion on the 91 day, Rs.9 billion on the 182 day and Rs.10 billion on the 364 day maturities. At last week’s auction, all bids on all three maturities were rejected for the first time in twenty weeks.

Meanwhile in money markets, the overnight call money and repo rates averaged at 6.75% and 6.37% respectively as surplus liquidity in the system stood at Rs.43.56 billion. The OMO department of Central Bank was seen successfully draining out an amount of Rs.3.5 billion at a weighted average rate of 6.41% for a period of seven days yesterday by way of a Repo auction.

Rupee remains stable

The USD/LKR rate on spot contracts continued to remain steady for an eighth consecutive day to close the day at Rs.143.95/15 yesterday. The total USD/LKR traded volume for 2 January was $ 59.56 million.

Some of the forward USD/LKR rates that prevailed in the market were: one month – 144.80/00; three months – 145.75/00; and six months – 147.55/90.

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