Stocks fall for 6th session, rupee snaps 2 days of gains

(Colombo) REUTERS: Sri Lankan shares extended falls into a sixth session yesterday and closed at their lowest levels in six-and-a-half years, due to shattered investor confidence after the Easter Sunday bombings. 

Investigators have dismantled a major part of the network linked to the Easter Sunday bombings, Prime Minister Ranil Wickremesinghe said on Tuesday, but warned the chance of further Islamist militant attacks could not be ruled out. 

The benchmark stock index ended 0.39 percent weaker yesterday at 5,352.20, its lowest close since Dec. 5, 2012. 

Turnover was Rs.228.8 million (US$1.31 million), lower than this year’s daily average of Rs.567 million. Last year’s daily average was Rs.834 million. Foreign investors bought a net Rs.30.8 million worth of shares yesterday, but they have been net sellers of Rs.4.4 billion worth of equities so far this year. 

The rupee closed weaker yesterday, snapping two straight sessions of gains, on dollar demand from banks. 

The rupee weakened 0.34 percent to close at 175.60/90 per dollar, compared with Wednesday’s close of 175.00/50, market sources said. 

Analysts expect it to weaken further due to possible outflows from stocks and government securities. 

The island’s currency lost 1 percent last week, but is up 3.98 percent this year as exporters converted dollars after investor confidence stabilised following the repayment of a US$1 billion sovereign bond in mid-January. 

The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

Foreign investors sold a net Rs.3.3 billion worth of government securities in the week ended April 30, extending the net foreign outflow to Rs.10 billion from the securities so far this year, the latest Central Bank data showed. 

The latest instability follows Sri Lanka’s plunge into political turmoil in October last year, when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, and Wickremesinghe was reinstalled as Premier. 

Investor sentiment took a big hit as a result of the 51-day political crisis, leading to credit rating downgrades and an outflow of foreign funds from government securities.