Sri Lanka’s shares extended a record-setting streak to six days on Monday on hopes of better earnings, amid heavy retail buying. The All-Share Price Index .CSE of the Colombo Stock Exchange hit a new all-time high of 4,161.56 points, surpassing its previous high of 4,131.84 on Friday. It closed 0.35 percent firmer at 4,136.05.
"Hopes of better earnings are driving the market despite the delay in the budget," said Prashan Fernando, chief operating officer at Acuity Stockbrokers.
Sri Lankan President Mahinda Rajapaksa on Friday appointed slightly smaller cabinet but kept other key ministries including finance and defence himself and his government has said the budget will be delayed until July. [ID:nSGE63M0HV]
Local investors bought hotel and banking shares, shrugging off the budget delay which might also delay the third tranche of $2.6 billion loan by the International Monetary Fund (IMF).
Analysts and economists expect the IMF loan delay to hurt foreign investors’ confidence in Sri Lanka’s post-war economy.
However, Central Bank Governor Ajith Nivard Cabraal on Thursday said there is no urgent need for the loan now as the reserves are at over $5.4 billion.
Traders said local investors will drive the bourse as long as the central bank can keep interest rates low.
Sri Lanka’s economic expansion is likely to be more than the 6.5 percent forecast this year due to rapid growth in infrastructure development and tourism, the central bank governor said on Thursday, after keeping key policy rates unchanged at multi-year lows. [ID:nSGE63L0HO], [ID:nSGE63L02S]
Investors had been expecting the government to come up with long-needed fiscal reforms to improve the investment climate.
For Sri Lanka’s key political risks, see [ID:nRISKLK]
Foreign investors sold a net 14 million rupees’ worth of shares, data showed. They have sold a net of around 15.2 billion rupees’ ($133.4 million) worth of shares this year.
Top fixed-line phone operator Sri Lanka Telecom SLTL.CM rose 0.7 percent to 63.75 rupees, while conglomerate Aitken Spence SPEN.CM gained 3.1 percent to 1,494.25 rupees.
The bourse is up 22.7 percent so far this year, making it Asia’s best-performing market.
The market has shot up over 178 percent since it hit a four-year low on Dec. 30, 2008, rising on optimism the island nation would end a 25-year war.
The end of the war last May and an IMF loan in July helped boost investor confidence.
The day’s turnover was 1.6 billion rupees ($14.2 million), around three times of 2009 average of 593.6 million rupees. The rupee currency LKR= closed weaker at 113.93/95 per dollar from Friday’s close of 113.90/93 due to importer demand for dollars, currency dealers said.
Dealers said yields of T-bond maturing in 2013 and 2014 dropped by around 25 basis points with heavy buying on low inflationary expectations after the central bank’s policy rates were kept steady last week.
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