Stock market ends 3-day winning streak as economic woes resurface

Tuesday, 5 April 2016 01:20 - - {{hitsCtrl.values.hits}}

Reuters: Shares closed lower for the first time in four sessions on Monday amid a steep rise in foreign outflow as worries over macroeconomic stability dented investor sentiment, stockbrokers said.

Foreign investors sold a net Rs. 406.6 million ($2.80 million) worth of shares, the highest since 17 March and extending net foreign outflows for the year to Rs. 2.63 billion.

The benchmark share index ended 0.06% lower, or down 3.86 points, at 6,079.15. The index had gained 0.85% in the past three trading days.

Turnover was at Rs. 643.2 million on some block deals, but still shy of this year’s daily average of Rs. 791.9 million.

“There is a lot of uncertain area, especially in the macroeconomic side. Investors are concerned over a rating downgrade and the still uncleared capital gain tax,” a stockbroker said, asking not to be named.

“The currency has been falling sharply in the last few weeks and the macroeconomic side is pretty pathetic at the moment.”

Sri Lanka on Friday postponed a plan to reintroduce Capital Gains Tax by six months after the move threatened to dent foreign investor sentiment.

Stockbrokers said the concern is now more on how the Government is going to impose the tax, rather than the tax itself.

Higher market interest rates and higher borrowing by the island nation facing a balance-of-payments crisis have also weighed on investor appetite for risky assets, dealers said.

The average weighted prime lending rate has risen 84 basis points to 9.19% since 19 February, when interest rates were increased by 50 basis points, Central Bank data showed.

A downgrade of Sri Lanka’s credit rating by Fitch and an outlook change by Standard & Poor’s in March have intensified scrutiny of the country’s finances. Sri Lanka borrowed over 25% more last year than in 2014, the finance minister said last month.

Shares in Carson Cumberbatch fell 5.3%, while conglomerate John Keells Holdings Plc edged down 0.74%.

5-day rupee forwards rise on dollar selling by State bank

Reuters: Five-day rupee forwards edged up on Monday as dollar selling by a State bank and remittances ahead of the Sinhala-Tamil new year outpaced mild importer demand for the greenback, dealers said.

The forwards, which act as a proxy for the spot currency and are called spot next, ended at 146.10/20 per dollar, compared with Friday’s close of 146.20/50.

Dealers said the State bank sold dollars at 145.20 levels, possibly on behalf of the Central Bank, to keep the rupee steady.

Central Bank officials were not available for comment.

“There were some remittances as people working in foreign countries usually send money for their family members ahead of the traditional new year,” said a currency dealer.

Sri Lanka will celebrate the Sinhala-Tamil New Year on 13 and 14 April.

The spot rupee, which has not been active since 27 January, did not trade. The Central Bank has fixed the spot trading price at 143.90 through moral suasion, dealers said.

The one-week forwards, which have been active since 27 January and were hovering near record lows last week, did not actively trade on Monday for a third straight session, the dealers said.

The rupee has been under pressure due to foreign investors exiting Government securities and amid the country’s economic woes.

Sri Lanka’s 2015 borrowing jumped more than 25% compared with the previous year due to high cost of refinancing loans, raised by the previous Government without Parliamentary approval, the Finance Minister said last week.

The Central Bank on Tuesday kept key policy rates steady, and said it was gauging the impact of recent tightening measures amid Government efforts to secure a $1.5 billion IMF loan, which is needed to avert a balance of payments crisis.