Stocks steady as rupee weakness hurts risk appetite

Wednesday, 2 May 2018 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Shares ended steady on Tuesday as a weak rupee, which is trading near all-time lows, kept risk appetite muted, stockbrokers said.

Sri Lanka’s president reshuffled his cabinet on Tuesday after the defection of several ministers from his party, but it failed to boost the stock market, which had been looking for an end to the country’s political uncertainty.

The Colombo stock index ended 0.04% firmer at 6,533.94. The index lost 0.15% last week.

“Cabinet reshuffle had nothing to do with the market. But at least it has ended speculation of uncertainty dragging into future,” said Prashan Fernando, CEO at Acuity Stockbrokers.

“Investors are looking for the stability of the rupee and interest rates. The market P/E ratio is below 10 times, which makes Sri Lankan stocks very attractive to foreigners compared to other frontier markets.”

Gains led by top mobile phone service provider Dialog Axiata, which rose 2.1%, were offset by losses led by top listed lender Commercial Bank of Ceylon Plc. Commercial Bank fell 0.9%.

Fitch Ratings said on Thursday that recent political developments in Sri Lanka have created some uncertainty over reform momentum and fiscal consolidation, and prolonged upheaval could undermine investor confidence ahead of large external debt maturities in 2019-22.

Turnover stood at Rs. 517.9 million ($ 3.3 million), less than half of this year’s daily average of around Rs. 1.1 billion.

Foreign investors bought a net Rs. 303.1 million on Tuesday, but they have sold net Rs. 650.8 million worth of equities so far this year.

Sri Lankan markets were open on Tuesday as the government, citing a Buddhist celebration on Sunday and Monday, decided to celebrate workers day on 7 May.