Stocks close lit­tle changed in thin trade; ru­pee edges up

Daily Mirror (Sri Lanka) - - BUSINESS -

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.

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