Stocks approach one-month low; rupee steady

Thursday, 12 July 2012 03:53 - - {{hitsCtrl.values.hits}}

Reuters: The stock market fell for the third straight session on Wednesday to approach a one-month low on concerns about the risk of higher interest rates, though the Central Bank kept its policy rates unchanged earlier in the day.

The Colombo Stock Exchange’s main index fell 0.76 per cent or 37.21 points to 4,868.39, its lowest since 13 June.

The bank left key policy rates unchanged for a third straight month, but yields in benchmark T-bills rose 9-14 basis points at a weekly auction on Wednesday to their highest since June 2009.

Some analysts expect the benchmark 364-day T-bill yield to reach 14.5 per cent from its current 13.10 per cent.

“There is no liquidity in the market,” said a stockbroker. “The Central Bank has postponed the pain and the pain is going to be more intense when it bursts,” he said referring to the policy rate announcement.

The Central Bank’s latest data showed private sector credit growth has been near a 16-year high of 33.5 percent year-on-year despite the monetary authority raising policy rates twice, restricting credit and allowing a more flexible exchange rate.

The day’s turnover was Rs. 269 million ($ 2.01 million), well below this year’s daily average turnover of Rs. 947.1 million.

Foreign investors were net buyers of Rs. 6.3 million worth of shares on Wednesday, extending the net foreign inflow to Rs. 23.75 billion into stocks this year.

The rupee currency ended steady at 133.75/85 against the dollar as importer demand for dollars offset by the exporter demand for the local currency, dealers said.

Dealers said importer demand for dollars is still high and heavy oil bills may threaten the stability of the rupee as a prolonged drought in Sri Lanka has increased oil imports for thermal power.