Sri lanka News – Sri Lanka stocks slipped over 1.5 percent on Wednesday (06) and hit its lowest in more than two months after falling for a for a third straight session, as fuel shortage, rise in the return of fixed assets and a looming political crisis weighed on the sentiment, brokers said, a day ahead of the central bank’s policy rate announcement.
The main All Share Price Index (ASPI) closed 1.67% or 121.24 points lower at 7,117.35, the lowest since April 26.
“The market is down on speculation that the central bank will hike the rates again,” a market analyst said.
The central bank has signaled of a possible rate hike through allowing the yields in risk-free short term government securities by at least 700 basis points in the last two weekly auction. On Wednesday, the yields in T-bills rose by over 400 basis points. Some analysts said the market expects a 300-basis point rate hike on Thursday.
Prime Minister Ranil Wickremesinghe’s parliament speech on Tuesday (05) also weighed in the sentiment, analysts said.
The market sentiment did not improve despite the PM informed the parliament that a staff-level agreement with IMF could be reached by August 2022 once the country presents a debt restructuring plan.
A looming political crisis with anti-government forces have called for a nation wide protest on Saturday (09) to oust President Gotabaya Rajapaksa and Prime Minister Wickremesinghe also has become a concern for investors.
The government has also declared that it can only provide fuel for essential services including health until July 10 and all non-essential services to work online as the country has run out of fuel.
Many public offices and all schools were closed this week due to a government decision to save fuel. Sri Lanka is facing the worst fuel crisis in its post-independent era.
The more liquid S&P SL20 index dipped 2.01% or 46.20 points to 2,247.04.
Analysts have said the market had a lot of gloomy sentiments as investors did not know what to do as the market was under selling pressure with no takers.
The turnover was 982 million rupees, less than a third of this year’s daily average turnover of 3.34 billion rupees.
The main ASPI has lost 3% in July so far after falling 9.3% in June, reversing a 6% gain in May. It lost 23% in April followed by a 14.5% fall in March.
The market has lost 41.7% so far this year after being one of the world’s best stock markets with an 80% return last year when large volumes of money were printed.
Sri Lanka’s sovereign debt default has already led the country to be rated with restricted/selective default rating by rating agencies, which has weighed on investor sentiment.
Foreigners bucked the trend and bought a net of 27.9 million rupees. The total foreign outflow so far this year is 1.09 billion rupees.
Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.
The fall was led by LOLC Holdings, which fell 6.6% to 358.5 rupees a share.
Sampath Bank slipped 3.9% to 27.5 rupees a share, while Expolanka closed 2.5% weaker at 158.3
rupees a share. (Colombo/July 06/2022)