Shares fall to 1-yr closing low, rate review in focus

Sri Lankan shares fell for a second straight session yesterday to a more than one-year closing low as expectations of an interest rate hike continued to drag down the market ahead of the Central Bank’s monetary policy review.

The Colombo stock index closed down 0.3 percent at 5,979.85, its lowest close since March 15, 2016. The index breached a key psychological barrier of 6,000 in the previous session.

“There are no buyers as most of the local investors are on the sidelines awaiting the outcome of the policy review,” said First Capital Equities (Pvt.) Ltd Head of Research Dimantha Mathew.

Sri Lanka’s Central Bank could raise its key policy rates in the coming months if it skips a chance to tighten at its second monetary policy review of the year on Friday, a Reuters poll showed, two weeks after the International Monetary Fund (IMF) called for further tightening. Analysts said investors expected a rate hike. Turnover stood at Rs.616.4 million, less than this year’s daily average of Rs.671 million.

The index has lost 2.1 percent since March 7, when the IMF called for monetary policy tightening if credit growth or inflation does not abate.

The bourse dipped further into oversold territory yesterday, with the 14-day relative strength index at 24.614 points versus Wednesday’s 26.758, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth Rs.194 million, raising the year-to-date net foreign inflow to Rs.3.26 billion in equities.

The treasury bill rates have risen between 33 to 77 basis points since July 28, when the Central Bank last raised the key interest rates.

Shares in Asian Hotel Properties PLC fell 2.9 percent, while Lanka ORIX Leasing Company PLC fell 0.8 percent and Sri Lanka Telecom PLC 0.9 percent.