Rupee hits record low; stock market bull run ends

Reuters: The rupee dropped 0.51% to a record low on Wednesday, dented by political uncertainty. 

Stocks slipped from a near six-week closing high hit in the previous session as foreign investors exited after President Maithripala Sirisena sacked the Prime Minister.

The rupee dropped to a record low of 175.65 per dollar on Wednesday, surpassing the previous record low of 174.75 hit in the previous session. The rupee ended at 175.60/176.00 per dollar on Wednesday, compared with previous close of 174.60/80. 

The rupee dropped 1.5% since the political crisis unfolded. The rupee weakened 3.7% in October after a 4.7% drop in September against the dollar. It dropped 14.3% so far this year.

Sri Lankan Opposition Leader Mahinda Rajapaksa was appointed Prime Minister last week after President Sirisena dismissed the incumbent in a surprise move that threatens political turmoil in the South Asian country. 

As President, the pro-China Rajapaksa ushered in billions of dollars of investment from Beijing to help rebuild the country following the end of a 26-year-long Civil War against Tamil separatists in 2009. 

The Colombo stock index ended 0.18% weaker at 5,953.47, slipping from its highest close since 19 September hit on Tuesday. The bourse shed 3.6% last month, and slipped 6.5% so far this year.

Analysts said retail investors, who have stayed away from the market during a number of investigations against market manipulation that allegedly occurred under the previous Government, actively bargain-hunted after the President’s announcement. 

Data from the Central Bank showed that foreign investors sold government securities worth a net Rs. 3.3 billion ($30.7 million) in the week ended17October. Sri Lanka has seen a net outflow of Rs. 85.9 billion in securities so far this year. 

Stock market turnover was Rs. 1.4 billion ($7.99 million) on Wednesday, more than this year’s daily average of Rs. 789.2 million. Foreign investors were net sellers of shares worth Rs. 139.4 million on Wednesday, extending the year-to-date net foreign outflow to Rs. 12.8 billion worth of equities.