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S.Lanka shares down on earnings, IMF conditions woes

[Reuters, Monday, 3 August 2009 12:23 No Comment]

Sri Lankan stocks .CSE fell on Monday in thin trade after blue chips posted poor earnings and as cautious investors steered clear, awaiting the full macroeconomic impact of an International Monetary Fund loan.

The all-share index closed 0.54 percent or 13.55 points down at 2,512.15. It hit a near 14-month closing high on July 27, soon after the IMF approved a $2.6 billion loan for Sri Lanka.

"Investor sentiment was low," said Prashan Fernando, executive director at Acuity Stockbrokers. "Foreign investors are not stepping in as expected. They might be waiting to see the full impact of IMF loan conditions on the exchange rate."

Analysts said despite the central bank’s maintaining of a steady exchange rate, foreign investors are still not convinced it will prevent gradual depreciation of the rupee LKR=.

IMF approved the loan On July 24 to help the country weather the global financial crisis and build up its low reserves, while rebuilding the north after a 25-year civil war.

Some traders said foreign funds were waiting to see the government’s approach in attracting investors from western countries as Sri Lanka’s relations with the West took a hit in the closing months of the war and immediately afterward.

Foreign buying was 16.8 million rupees on Monday.

Total turnover was 204.2 million rupees ($1.78 million), the lowest since July 14 and less than half the 2008 daily average of 464 million rupees.

Top conglomerate John Keells Holdings JKH.CM, which on Thursday posted a 22 percent drop in its net profit for the first quarter, fell 2.03 percent to 133 rupees. [ID:nCOL428071]

Development lender DFCC Bank DFCC.CM closed 0.89 percent down 139.50 rupees. It posted a 6.9 percent drop in quarterly profit on Friday. [ID:nCOL386070] The bourse is up 67.1 percent in 2009 and 31.7 percent higher since the government declared victory in the war on May 18. The rupee ended flat at 114.90/95 a dollar as a state bank, which the central bank uses to direct the market, bought the dollar at 114.90 for the eleventh straight week.

Nandalal Weerasinghe, chief economist at the central bank, on Wednesday said the bank does not want the rupee to appreciate from the current level ‘right now’.

Sri Lanka plans to raise $150 million through the sale of two-year, dollar-denominated development bonds to repay investors holding similar instruments due to mature this month, the central bank said on Monday. [ID:nCOL480675]

The central bank rejected all bids for 30-month and 46-month Treasury bonds at a weekly auction on Monday.

Sri Lanka is considering a $500 million sovereign bond issue among possible fundraising options and expects to make a decision in the next few weeks, central bank Governor Ajith Nivard Cabraal said on Friday. [ID:nSP417837]

[Full Coverage]

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