ECONOMYNEXT – Sri Lanka’s stock index plunged 4.47 percent on Monday (21) to its lowest since October 2020 as margin calls on declining shares and economic woes visibly kicked in the form of power cuts and fuel shortage weighed on investor sentiment, brokers said.

The main All Share Price Index (ASPI), closed 542 points lower at 11,591.37 points, its lowest since October 05, 2021.

The index has lost 5.9 percent so far this year and 10.2 percent so far for the month despite listed companies posting better than expected earnings in the December quarter.

“We usually see sales at month ends, but it has worsened with the reports of power cuts and fuel shortages as the people feel the brunt of the economic crisis in the country,” a top analyst said.

“I expect the trend to continue till the month-end. I don’t think there will be a recovery any time soon and if the power cuts aggravate definitely it will worsen.”

Another analyst said the margin calls have forced investors to sell their shares to recover credit for stock purchase.

Sri Lanka announced a maximum three hour power cut as the country’s forex shortage has led to fuel scarcity due to lack of dollars to import fuel.

SL20 of the more liquid index closed 5.02 percent or 207.88 points weaker at 3,932.78. The fall of this index prompted the market to temporarily halt trading as the plunge was over 5 percent.

Analysts had predicted a downtrend in the market due to the uncertainties in the market and the economy. The market lost 2.6 percent last week.

The day’s turnover was 4.2 billion rupees, lower than this year’s average turnover of 6.8 billion rupees.

The market has been in a declining trend due to the ongoing forex crisis most companies are going through, despite many companies posting better-than-expected earnings in the December quarter.

The rupee exchange rate is fixed at around 200 rupees by the central bank, but it is now above 250 rupees per dollar in the grey market.

Foreign investors, who are highly worried about possible sharp depreciation or devaluation in the currency, bucked the trend and bought a net of 79.9 million rupees worth shares on Monday.

The foreign sales of shares so far this year have been 3.3 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.

LOLC Holdings, Expolanka and Royal Ceramic dragged the market down on Monday.

LOLC Holdings fell 9.41 percent to close at 1,025.00 rupees a share, while Expolanka, the market heavyweight that has export and freight businesses plunged 8.49 percent to 288.00 rupees a share.

Royal Ceramic lost 7.96 percent to 61.30 rupees a share. (Colombo/Feb21/2022)