18 December 2018 10:42 am Views - 1093
(Colombo) REUTERS: The Sri Lankan rupee strengthened yesterday while bond yields dropped as a seven-week political crisis appeared to ebb after President Maithripala Sirisena reinstated the premier he had initially sacked in a widely criticised move.
Ranil Wickremesinghe, who was sworn into office on Sunday, held discussions with Sirisena about forming a cabinet and restoring stability in the island nation of 21 million people just off the southern coast of India.
Wickremesinghe’s reinstatement, which is expected to end a political crisis that began in late October when he was surprisingly sacked, is seen as an embarrassment for the president. Yields on Sri Lanka’s dollar bonds due in 2022, which had risen more than one percent since the crisis started in October, fell 40 basis points to 7.6 percent. The rupee edged up to 179.60 per dollar from Friday’s close of 179.90/180.10.
“The market has taken Wickremesinghe’s appointment positively. But investors will have to wait and watch whether the president and prime minister will get along with each other,” a currency dealer said, requesting anonymity as he was not authorised to speak to media. Sirisena had replaced Wickremesinghe with former President Mahinda Rajapaksa following differences over policy matters and
other issues.
However, Rajapaksa failed to win a parliamentary majority and resigned on Saturday as a government shutdown loomed.
Sirisena had repeatedly said he would not reappoint Wickremesinghe as prime minister. However, he had to change his stance to gain parliamentary approval for a temporary budget that is required by
January 1. Preparations for a vote on account will begin as soon as Wickremesinghe names a finance minister, Treasury Secretary S.R. Attygala said.
The vote on account has become mandatory after parliament approval for the budget for 2019 (January-December) was derailed following Wickremesinghe’s ouster in October.
Sri Lanka’s stock market index held steady at 0800 GMT, while analysts said cautious investors were buying risky assets before the cabinet appointments are announced.
(Colombo) REUTERS: The Sri Lankan rupee ended steady yesterday as political crisis in the South Asian island nation showed signs of easing after President Maithripala Sirisena reinstated the premier he had initially sacked in a widely criticised move, but foreign outflows from stocks weighed on sentiment.
Political paralysis remained the main concern for investors since Sirisena abruptly sacked Ranil Wickremesinghe from the prime minister’s post and replaced him with Mahinda Rajapaksa, who failed to win a parliamentary majority and resigned on Saturday as a government shutdown loomed.
Wickremesinghe sworn in as Sri Lanka’s prime minister on Sunday, making a remarkable comeback weeks after being ousted by President Sirisena under controversial circumstances.
The Sri Lankan rupee strengthened in early trade yesterday, while bond yields dropped as a seven-week political crisis appeared to ebb, but investors took a cautious stance to observe whether Sirisena and Wickremesinghe could work together.
Rajapaksa resigned soon after taking office and giving the country’s president a political space to prevent an imminent government shutdown.
On Thursday, the Supreme Court ruled that President Sirisena’s decision to dissolve parliament ahead of its term was unconstitutional, in a setback for the embattled leader in his dispute with an ousted prime minister.
If a budget is not approved by the parliament this month, the government might face a shutdown, government officials told Reuters.
Foreigners were net sellers of a net Rs.18.1 million worth of stocks yesterday. They have been net sellers of Rs.10.6 billion since the political crisis began on October 26. The bond market saw outflows of about Rs.56 billion between October 25 and December 14, the Central Bank
data showed.
The rupee which traded slightly firmer in the early trade ended steady at 179.90/180.00 per dollar, compared with 179.90/180.10 the previous session.
Credit rating agencies Fitch and S&P downgraded Sri Lanka’s sovereign rating last week, citing refinancing risks and an uncertain policy outlook, after Sirisena’s sacking of his prime minister in October triggered the political crisis.
This year, there have been Rs.20 billion of outflows from stocks and Rs.148.2 billion from government securities, the latest data from the bourse and the Central Bank showed.
The rupee hit a record low of 180.85 to the dollar on November 28. It has weakened about 3.8 percent since the political crisis began. The currency dropped 1.8 percent in November and has lost 17.1 percent this year.
Moody’s downgraded Sri Lanka on November 20 for the first time since it started rating the country in 2010, blaming the political turmoil for aggravating its already problematic finances.
Five-year government bond yields have risen 60 basis points since the political crisis began, while yields on Sri Lanka’s dollar bonds due in 2022 have risen around a percentage point to 8.0 percent through Friday, fell 0.5 percent to 7.5 percent yesterday.
The Colombo stock index ended up 0.08 percent at 6,067.63 yesterday. Turnover was Rs.133.8 million, well below this year’s daily average of Rs.821.6 million.