Bourse broods; negative return back to double digit level

Wednesday, 21 November 2012 00:58 - - {{hitsCtrl.values.hits}}

The Colombo stock market suffered a sharp dip yesterday amidst lacklustre activity and bearish sentiments, as the year-to-date negative return shifted to double digit territory.

The Bourse saw Rs. 27 billion in value wiped off in a single session, the sharpest dip in recent weeks. The ASI was down 1.27%, bringing the year-to-date negative dip to 10.5%.

As reported in the Daily FT yesterday, the market had dipped by over 1% and lost Rs. 21 billion in value since the Budget 2013 presentation on 8 November.

The last time the ASI’s negative return at double digit was in first week of September, after which it rose sharply by 15% during the month to bring the year-to-date negative return to below 2%. Since early October the market had lost ground recovered previously.

Turnover was a below average Rs. 272 million whilst foreign interest remained intact with a net inflow of Rs. 75 million. Despite recent shedding of stakes in ERI by Lionhart, net foreign inflow has been a healthy Rs. 34.2 billion year-to-date.

The persistent losing streak at the Colombo Bourse has raised serious concern among capital market stakeholders. This was despite a widely-perceived positive Budget, surprising upturn in corporate earnings, and attractive valuations of a wide collection of good or fundamentally sound stocks.

Upward pressure on interest rates has dragged equity investors to fixed income options, as per some analysts, in addition to a weaker confidence level given the political and judicial issues.

The Government appears to be inclined to keep the interest rate lower, judging by the Central Bank keeping policy rates unchanged for seven months. The Treasury also remains optimistic about favourable GDP growth, lower inflation, and improved fiscal management amidst a challenging environment.