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Sri Lankan shares post worst fall in 28 months on foreign selling


JULY 03, 2018

COLOMBO, July 2 (Reuters) – Sri Lankan shares fell over 1 percent on Monday, the sharpest in nearly 28 months, as continued foreign selling and concerns about lower economic growth hurt sentiment, stockbrokers said.

Foreign investors sold the island nation’s risky assets for an eighth successive session, extending the foreign outflow to 841.4 million rupees ($5.32 million).

The Colombo stock index ended 1.07 percent weaker to 6,128.34, its biggest intraday percentage fall since March 9, 2016. The index closed lower for 15 sessions in 17, and marked its sixth straight weekly drop last week.

“Foreign selling triggered the market fall. We still do not see government funds actively coming into market and political uncertainty also weigh on sentiment,” said Jaliya Wijeratne, CEO, First Capital Equities.

Foreign investors net sold equities worth 311.2 million rupees ($1.97 million), extending the year-to-date foreign outflows to 1.64 billion rupees this year.

Turnover was 756 million rupees, less than this year’s daily average of 935 million rupees.

Shares in top listed lender Commercial Bank of Ceylon ended 0.2 percent lower, top conglomerate John Keells Holdings closed 1.9 percent lower, and Sri Lanka’s leading mobile phone service provider Dialog Axiata closed 1.4 percent weaker.

Finance Minister Mangala Samaraweera said early this month that the economy was likely to grow about 4.5 percent this year, below a central bank estimate of 5 percent.

The International Monetary Fund (IMF) said on June 20 that Sri Lanka’s economy remained vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Ratings agency Moody’s said on Wednesday a strengthening U.S. dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation.

Moody’s said a strong U.S. dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey, and Zambia.

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management, retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.