Stocks close little changed in thin trade; rupee edges up
REUTERS - Sri Lankan shares ended almost flat in dull trade yesterday, but posted their lowest close in nearly three weeks, while the rupee ended slightly firmer, market sources said.
On Friday, the Central Bank cut its key interest rates to support its faltering economy as overall business and consumer confidence slumped following deadly bomb attacks in April.
Traders said the Easter Sunday bombings and violence following the attacks, and worries over slowing economic growth weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. Sri Lanka is unlikely to hit its full-year economic growth target of 3-4 percent following the bombings, junior finance minister Eran Wickremeratne told Reuters last month.
A Reuters poll has forecast growth to slump to its lowest in nearly two decades this year.
The Central Bank chief said on Friday that he expected the economy to grow by 3 percent or less this year due to the impact of the Easter attacks, and the bank was preparing a downward revision to its earlier projection for 4 percent growth.
The benchmark stock index ended 0.01 percent weaker yesterday at 5,276.84, its lowest close since May 17. It rose 0.3 percent last week, recording its second straight weekly gain. The bourse has declined 12.81 percent so far this year. Sri Lankan markets were closed on Wednesday for a holiday.the government’s pension fund has resumed investing in risky assets as the stock market is “extremely undervalued at the moment and is considered a good time to go into”, the Central Bank governor said on Friday.
Turnover was Rs.126.2 million (US$715,622.34), less than this year’s daily average of around Rs.539.2 million. Last year’s daily average was Rs. 834 million.
Foreign investors sold a net Rs.11.1 million worth of shares yesterday, extending the year-to-date net foreign outflow to Rs.5.58 billion worth of equities.
The rupee ended at 176.35/50 per dollar, compared with Tuesday’s close of 176.45/55, market sources said.
Analysts expect the rupee to weaken further as money flows out of stocks and government securities.
The rupee fell 0.06 percent last week but is up 3.5 percent for the year. Exporters had converted dollars as investor confidence stabilised after a US$1 billion sovereign bond was repaid in mid-january.
The rupee dropped 16 percent in 2018 and was one of the worst-performing currencies in Asia.
Foreign investors bought a net Rs.716.3 million worth of government securities in the week ended May 29, but the island nation saw a net foreign outflow of Rs.18.4 billion so far this year, Central Bank data showed.
Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds.