Stocks end at over 5-week high on local buying; rupee slips

(Colombo) REUTERS: Sri Lankan shares rose for the fourth straight session yesterday to hit a more than five-week closing high on local buying, offsetting continued foreign selling in equities, while the rupee ended slightly weaker on dollar demand from importers. 

The benchmark stock index ended 0.81 percent firmer at 5,378.73, its highest close since May 7. It fell 0.24 percent last week and declined 11.13 percent this year so far. The Central Bank cut its key interest rates on May 31 to support a faltering economy as overall business and consumer confidence slumped following deadly bomb attacks in April.

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 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 in”, the Central Bank governor said last month at its monetary policy meet.

Yesterday’s stock market turnover was Rs.254.8 million, less than this year’s daily average of about Rs.527.3 million. Last year’s daily average was Rs.834 million rupees. 
Foreign investors sold a net Rs.26.8 million worth of shares yesterday, extending the year-to-date net foreign outflow to Rs.5.74 billion. 

The rupee ended at 176.45/60 per dollar, compared with Tuesday’s close of 176.30/60, market sources said.

Analysts expect the rupee to weaken further as money flows out of stocks and government securities. 

The rupee fell 0.03 percent last week but is up 3.48 percent for the year. Exporters had converted dollars as investors’ 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 sold a net Rs.3.5 billion worth of government securities in the week that ended on June 4, extending the island nation’s net foreign outflow to Rs.21.9 billion so far this year, the Central Bank data showed.