Sri Lanka shares fall on political and economic concerns

ECONOMYNEXT – Sri Lanka’s main stock index fell 0.34% on Wednesday (04), the first trading day of this week, as optimism eroded amid political and economic uncertainties amid a persistent protest to oust the country’s leaders and the rapid depreciation of the rupee, dealers mentioned.

The main All Share Price Index (ASPI) fell 26.22 points to 7,598.04 at the close.

Sri Lankan Finance Minister Ali Sabry said on Wednesday that the country’s usable foreign exchange reserves had fallen to less than US$50 million, equivalent to less than a day’s import requirement. The 84.5 billion euro economy has already suspended foreign debt payments because it ran out of dollars.

Youth-led protests demanding the resignation of President Gotabaya Rajapaksa and his government continued for a 25th day near the presidential secretariat and the unrest deprived Rajapaksa of appearing in public. The protests have already led to the resignation of the cabinet and a central bank governor.

But the apolitical protesters demanded nothing less than Rajapaksa’s resignation, increasing political risks in the island nation which enjoyed strong political stability under the incumbent president until early April this year.

Meanwhile, the more liquid S&P SL20 index gained 0.07% or 1.75 points to close at 2,510.99.

The market has advanced over the past three sessions after emerging market investor Mark Mobius signaled strong optimism about bond and equity investments in Sri Lanka last week.

The first two days of the last trading week, the market closed within minutes of opening for trade due to the 10% circuit breaker.

Turnover for the day was 1.1 billion rupees, less than a quarter of this year’s average daily turnover of 4.5 billion rupees.

Investors are also concerned about the sharp drop in the rupee, which has fallen almost 80% since it was allowed to show flexibility on March 7.

The market lost 14.5% in March and 23% in April. Overall, the market has lost 37.8% so far this year after being one of the best stock markets in the world with a return of 80% last year.

Foreign investors bucked the trend and bought shares with a net worth of Rs 36.6 million. However, the market has seen a total outflow of Rs 1.3 billion since the start of the year.

Banks Expolanka, Vallible One and DFCC pushed the index lower on Wednesday.

Shares of Expolanka Holdings fell 2.8% to close at 164.75 rupees per share, Vallibel One ended down 7.4% at 32.50 rupees per share while DFCC bank fell 4 .6% to close at 41.30 rupees per share. (Colombo/May 4, 2022)

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