Stocks down for 5th session amid foreign outflows; political woes weigh

(Colombo) REUTERS: Sri Lanka’s stocks fell for the fifth straight session yesterday to a more than 10-week closing low, as foreign investors sold the island nation’s risky assets, while the rupee closed lower.

Investors were worried of political uncertainty after a Sri Lankan court set up a three-judge panel on Monday to hear a petition challenging the citizenship of presidential nominee Gotabaya Rajapaksa, which could disqualify the former defence chief from the Nov. 16 elections, stock brokers said.

Dealers said fears of a possible court decision that could disqualify Rajapaksa’s nomination weighed on the market. The Supreme Court heard the petition for the second day yesterday. 
The benchmark stock index ended 0.36 percent lower at 5,677.50, its lowest since July 22. The bourse fell 0.38 percent last week. So far this year, the index has dropped 5.9 percent. 
The index rose in a couple of sessions last week, after the Central Bank said on Tuesday that the Monetary Board had ordered banks to reduce interest rates on all loans and advances by at least 200 basis points by Oct. 15. 

Equity market turnover was Rs.696.4 million (US$3.84 million), 

less than this year’s daily average of about Rs.657.8 million. Last year’s daily average was Rs.834.0 million. 

Foreign investors were net sellers of Rs.257.3 million worth of shares yesterday, extending the year-to-date net foreign outflow to Rs.2.88 billion of equities, according to index data.
Meanwhile the rupee ended 0.1 percent weaker at 181.30/70 per dollar compared to Wednesday’s close of 181.00/182.10. The rupee fell 0.41 percent last week. However, the currency is up 0.38 percent this year. 

The International Monetary Fund cut its forecast for Sri Lanka’s 2019 economic growth to 2.7 percent from 3.5 percent, as the Easter Sunday attacks on hotels and churches earlier this year dented tourism and broader business activity. 

Foreign outflows from government securities, one of the major reasons behind the rupee’s recent weakness, may not abate till the end of parliament elections in 2020, some analysts said. 
The Central Bank does not release foreign trade numbers on a daily basis, but weekly data in the past four weeks has shown a steady outflow. 

Foreign investors sold government securities worth Rs.439 million in the week ended Sept. 25, extending the net foreign outflow so far this year to Rs.55.3 billion through Sept. 25, according to the Central Bank data.