Stock market slips from 4-wk closing high on profit-taking

Reuters: Shares ended slightly weaker on Thursday, down from a four-week closing high hit in the previous session, as investors sold diversified and telecom shares after a three-day rising streak.

The Colombo stock index fell 0.03 percent to end at 6,173.72, sliding from its highest close since 18 January hit on Wednesday as investors picked up the battered blue-chip shares.

“We saw a bit of profit-taking in the latter part of the day. But some crossings pushed turnover,” said Dimantha Mathew, head of research at First Capital Equities Ltd.

Shares in Carson Cumberbatch Plc fell 8.14%, while conglomerate John Keells Holdings Plc lost 0.54%, dragging down the overall index.

Turnover stood at Rs. 633.1 million ($ 4.20 million), in line with this year’s daily average of Rs. 631.5 million.

Foreign investors net bought Rs. 67.5 million worth of equities on Thursday. They have net sold Rs. 223.2 million worth of shares so far this year. “With interest rates on the rise, the market will remain slow in the next few days and many investors will wait to see the direction from the sovereign bond issue,” Mathew said. The Sri Lankan cabinet approved a $1.5 billion sovereign bond issue to repay loans and manage interest payments, a cabinet spokesman said on Wednesday. Yields on treasury bills rose 5-8 basis points at a weekly auction on Wednesday and are hovering at a more than four-year high.

Rupee falls on importer dollar demand, bond selling

Reuters: The rupee ended weaker on Thursday, hurt by importer dollar demand and as foreign investors sold government securities amid concerns of further depreciation in the domestic currency, dealers said.

Foreign investors have net sold Rs. 31.38 billion ($ 208.30 million) worth of government securities in the four weeks to 8 February, according to latest Central Bank data.

The market is factoring in a gradual depreciation risk for the rupee and expects a 4-5% fall in the currency this year, they said.

Finance Minister Ravi Karunanayake said after market hours on Tuesday that protecting a fragile rupee was more important than controlling interest rates as the local currency tended not to rebound after depreciating.

Rupee forwards were active, with one-month forwards actively traded ended at 152.00/15 per dollar, weaker from Wednesday’s close of 151.60/70.

Two-week forwards, which were traded in the latter part of the day, ended at 151.60/70 per dollar, weaker from Wednesday’s close of 151.25/30.

“There was huge demand from both foreign and local (banks). Import demand is also there,” said a currency dealer, requesting not to be named.

“The underline message from finance minister’s comment is that the rupee needs to be controlled. The delay of Chinese projects also putting the pressure on currency as the expected money is not coming on time.”

Reuters reported that China will delay a planned $ 1.1 billion investment in a port on its modern-day ‘Silk Road’ until Sri Lanka clears legal and political obstacles to a related project, sources familiar with the talks said, piling more pressure on the island nation.

The Central Bank governor, Indrajit Coomaraswamy, said last week the bank was not planning to abruptly stop supporting the rupee.

The apex bank has allowed the currency to gradually depreciate since mid-December, revising its spot reference rate multiple times. It has said that defending the currency with foreign exchange reserves does not “seem sensible”.

The rupee has weakened 0.77% so far this year, under pressure due to rising imports and net selling of government securities by foreign investors. It fell 3.9% last year, following a 10% drop in 2015.

The Central Bank kept its key rates steady last week for a sixth straight month, but flagged possible “corrective measures” in the months ahead, in a sign that further tightening might be on the cards to temper inflation pressures and safeguard a fragile rupee.