ECONOMYNEXT – Sri Lanka’s stock market closed weaker on Monday (07) dampened by economic woes and a looming debt crisis, brokers said.

The main All Share Price Index (ASPI) fell 1.03 percent or 130.91 points to close at 12,631.69 points.

“Investors expect the central bank will allow the market interest rates to rise to defend the currency and curb inflation,” an analyst said.

“The excess money printing has caused the pressure on the exchange rate and the central bank has to increase the rates if it wants to defend the currency at the current level.”

First Capital Market Research said in a note that the index skid as ambiguous investors resorted to book profits in selected counters over rising uncertainties in the economy.

S&P SL20 of the more liquid index down 1.22 percent or 52.90 points to 4,280.86.

Foreign investors, who are highly worried about possible sharp depreciation or devaluation in the currency, sold a net of 457.1 million rupees. The foreign sales so far this year has been 3.4 billion rupees. In 2021, the Sri Lanka stock market suffered a net foreign outflow of 50 billion rupees.

Analysts had predicted that the economic concerns would drag the market from time to time until the government finds a sustainable solution for the country’s looming debt crisis.

The island nation’s foreign reserves fell 25 percent to 2.36 billion US dollars by end January, the central bank’s latest data showed. That reserves include a 1.5 billion US dollar swap from China and 400 million US dollar swap from India.

The island nation repaid a 500 million US dollar loan on January 18 to avoid a sovereign debt default, but persisting forex shortage has weighed on the country’s oil imports and led to power cuts. The government is struggling to avoid continuous power cuts amid announced and unannounced power cuts across the country.

The day’s turnover was 6 billion rupees, less than this year’s daily average of 7.9 billion rupees. And a two-week low.

Investor sentiment has turned negative amid record-high inflation, depreciation pressure on the rupee, central bank’s excess printing money and the government’s failure to take sustainable action to deal with the debt crisis.

Analysts said investors are worried about possible currency depreciation, the government’s ability to avert a sovereign debt default, and fuel shortages hitting factory manufacturing and thus hitting future earnings.

Expolanka, LOLC Holdings and Browns Investment dragged the index down on Monday.

Expolanka, the market heavyweight which has export and freight businesses, plunged 2.75 percent to close at 335.75 rupees. The firm reported a staggering four-fold earning of 23 billion rupees in the December 2021 quarter compared to a year earlier, pushed by higher freight rates and recovery of sales to North American and European markets.

LOLC Holdings fell down 2.54 percent to 1,151.75 rupees a share, while Browns Investment slipped 3.23 percent to 15.00 rupees a share. (Colombo/Feb07/2022)