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[size=18]ECONOMYNEXT – Sri Lanka’s main stock index hit a fresh record high on Tuesday after crossing the 8,700 psychological benchmark as investors bought shares with the central bank’s tightening measures yet to impact the bourse, brokers said.
The index touched 8,815.08 points, it’s historical high, before retreating to close at 8,667.95 with a 2.22 percent gain for the day. The S& P SL20 index of more liquid stocks gained 0.90 percent or 28.44 points to close at 3,176.40.
The day’s turnover was 9.9 billion rupees, well over this year’s average daily turnover of 3.9 billion rupees.
“Investors have very little option with the excess money and low interest rates,” a stock broker said asking not to be named.
“The central bank’s policy rate hike has not started to bite yet.”
The central banks started an overnight repo auction to withdraw liquidity for the first time in many months as it ran low on reserves.
On Monday, ASPI hit gained above 3 percent despite a 10-day lockdown, as investors bought stocks that are expected to perform well in the future despite possible increased interest rates.
Sri Lanka went for a 10-day lockdown on Friday through August 30 after several allies of the ruling coalition and influential Buddhist monks appealing to President Gotabaya Rajapaksa to go for a lockdown to control COVID-19 deaths and spreading.
Analysts said the unusual gain could be due to investors focusing on the risky assets during the lockdown, despite prevailing risks of gradual tightening of interest rates.
The central bank raised the key policy rates by 50 basis points from the record high and increased banks’ reserve ratio by 2 percent with effect from Sept.1.
Sri Lanka also has raised a de facto policy rate involving a ceiling price on Treasuries auction by 55 basis points to 5.93 percent from 5.38 percent, after the overnight injection rate was raised to 6.00 percent Thursday.
Sri Lanka stocks have been on the rise partly due to record low-interest rates, excess liquidity in money markets, and some businesses being disrupted due to import controls triggered by money printing. The trend of net foreign selling has been continuing since early last year.
Analysts expect a market correction soon when the central bank’s tightening measures start to bite.
Sri Lanka’s pandemic situation has been worsening with COVID-19 daily death toll has been recording a fresh record high in most of the days in the last week. The county saw a fresh record of 194 deaths along with 4,355 new infections on Monday (23).
The day’s gain was led by Commercial Leasing and Finance, LOLC Fiance and LOLC Holdings.
LOLC Holdings rose 16 rupees to close at 507.50 rupees a share.
LOLC Finance, subsidiary of LOLC, up 1.80 rupees to close at 12.60 rupees a share while LOLC Development and Finance fell 17.25 rupees to close at 456.00 rupees. Analysts says LOLC groups $1 billion investment in Colombo Port City is seen as positive and made the stocks attractive.
Expolanka, which has a significant export component in its business fell 2.75 rupees to close at 120.00 rupees a share.
Foreign investors, however, sold a net 243 million worth of shares on Monday, and the market has suffered a net foreign outflow of over 36.4 billion rupees so far this year.
The bourse saw 107 stocks gaining against 91 falling on Tuesday. (Colombo/August24/2021)
Tags:
COLOMBO STOCK EXCHANGESRI LANKA STOCK MARKET
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