Stock market hits fresh 3-month closing low ahead of budget

Reuters: Shares extended losses for a third straight session to close Tuesday at a fresh three-month low as investors shrugged off the Central Bank’s decision to keep rates unchanged.

The Central Bank held the benchmark interest rates on hold late on Monday, as expected, saying its monetary policy stance remained appropriate as credit growth slowed.

The benchmark index of the Colombo Stock Exchange ended down 0.14%, or 9.06 points, at 6,400.17, its lowest close since 29 July. The index lost 1.92% in October.

Sentiment was also muted as investors remained cautious ahead of the national budget scheduled on 10 November.

“Market wasn’t much active as the investors are waiting to see if there would be capital gains tax and how the budget is going to be,” said Richard Pieris Securities Ltd. Chief Operating Officer Reshan Kurukulasuriya.

Prime Minister Ranil Wickremesinghe said last week the Government will introduce a lower tax regime in its upcoming budget to boost faltering investment.

Traders said the prime minister’s statement failed to lift the sentiment.

Tuesday’s turnover was Rs. 321.3 million ($ 2.17 million), less than half this year’s daily average of Rs. 726.2 million.

Foreign investors were net sellers of Rs. 16.8 million worth of equities on Tuesday, extending the net foreign outflow so far this year to Rs. 1.75 billion worth of shares. They bought a net Rs. 1.21 billion worth of shares in October.

Sri Lanka’s quarterly earnings season started two weeks ago, but most locally listed firms report in late October or early November.

Shares in Nestle Lanka Plc fell 4.29% while Ceylon Tobacco Company Plc lost 0.59%.

Rupee ends weaker on importer dollar demand

Reuters: The rupee ended weaker on Tuesday due to dollar demand from importers, dealers said, a day after the country’s Central Bank kept key policy rates steady.

Despite the rupee being under downward pressure, the Central Bank kept its benchmark interest rates on hold late on Monday, as expected, saying its monetary policy stance remained appropriate as credit growth slowed.

Rupee forwards were active, with one-week forwards ending weaker at 148.60/70 per dollar, compared with Monday’s close of 148.35/40.

“The importer demand is building up. In addition to the seasonal importer demand, the bond outflows have also put pressure on the currency,” a currency dealer said, asking not to be named.

The Central Bank on Friday raised the spot reference rate by 50 cents to 147.40 per dollar from 146.90 as higher importer dollar demand weighed on the currency, while moral suasion by the Central Bank prevented a steeper fall in the rupee. Officials from the central bank were not available for comment. The spot rupee is usually managed by the Central Bank, and market participants use the forward market levels for guidance on the currency.

Dealers said selling of Government securities by foreign investors also put pressure on the currency.

Foreign investors have sold a net Rs. 16 billion ($ 108.40 million) worth of government securities in the two weeks to 26 October, data from the Central Bank showed.

The market was waiting for direction from the national budget, which is due on 10 November, dealers said. The market also shrugged off a long-awaited economic statement by Prime Minister Ranil Wickremesinghe, dealers said.

Wickremesinghe said last week the Government would introduce a lower tax regime and concessions on investment in its next budget to boost faltering investment.