Shares fall for 4th straight session on economic and political stability, rupee weakens

(Colombo) REUTERS: Sri Lankan shares fell for a fourth straight session yesterday, hovering near 5-1/2-year low, as investors sold blue chips amid concerns over economic and political stability.

Parliament late on Tuesday passed the second reading of the 2019 budget that raises spending while setting an ambitious goal to reduce the country’s large fiscal deficit. The final vote is scheduled for April 5.

Prime Minister Ranil Wickremesingheled government’s political stability has been questioned by the opposition since he was reinstated as Prime Minister after a 51-day political crisis. The Colombo Stock Exchange index fell 0.71 percent to 5,606.96, its lowest close since September 9, 2013. The benchmark stock index had fallen 1.63 percent last week, recording its third straight weekly fall. It declined 2.9 percent in February, its second straight monthly fall. The turnover was Rs.270.2 million, less than a third of last year’s daily average of Rs.834 million. Foreign investors bought a net Rs.45.6 million worth of shares yesterday, but they have been net sellers of Rs.5.93 billion worth of equities so far this year. Shares in conglomerate John Keells Holdings PLC fell 2.5 percent, while Nestle Lanka PLC lost 4.1 percent. The biggest listed lender Commercial Bank of Ceylon PLC fell 3 percent. The rupee, which fell for a third session, closed a tad weaker at 178.80/90 per dollar compared to Tuesday’s close of 178.70/90. Inflows from a sale of US $ 2.4 billion sovereign bonds were expected to boost the rupee.

The sale is crucial for the island nation to boost investor sentiment, which was dented by rating downgrades by all three rating agencies after the political crisis in October.

The rupee has climbed 2.1 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a US $ 1 billion sovereign bond in mid-january.

Worries over heavy debt repayment after the 51-day political crisis that resulted in a series of credit-rating downgrades dented investor sentiment as the country struggled to repay its foreign loans.

The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows.

Foreign investors bought a net Rs.636.3 million worth of government securities in the week ended March 6, the first net inflow in three weeks, but they have sold a net Rs.2.8 billion so far this year, the Central Bank’s latest data showed.