ECONOMYNEXT – Sri Lanka stocks closed at one-week low on Monday (27), reversing a four straight session winning streak as the country’s fuel shortage weighed in on the market sentiments, brokers said.

Power and Energy Minister on Sunday asked the public to use fuel sparingly as there was no fuel shipment scheduled to arrive into Colombo in the foreseeable future.

The main All Share Price Index (ASPI) closed 2.6% or 199.3 points lower at 7,451.91, its lowest close since June 20.

“The market slipped on the fears that the economy would come to a standstill as the country struggles to find dollars to buy fuel,” a market analyst said.

“There is no confirmation when we will get the next shipment.”

Minister of Power and Energy told reporters that Sri Lanka’s oil suppliers are wary to supply after the recent downgrades.

Traditional suppliers to state-run fuel retailer Ceylon Petroleum Corporation could no longer bear the risk of supplying Sri Lanka due to unsettled arrears, he said.

The country also has issues opening letter of credit and some of the new suppliers are asking for pre-payments.

Analyst have said there was a lot of selling pressure in the market because the investors do not see an ideal market at least for the next 9-months due to high interest rates and taxes.

The turnover was 1.4 billion rupees, highest since June 7, but still less than a half of this year’s daily average turnover of 3.49 billion rupees.

A 10-member IMF team arrived in Sri Lanka and began discussions on policy corrections with Prime Minister Ranil Wickremesinghe on June 20 and the talks have been seen as positive for the investor sentiment. However, Sri Lanka must show progress on debt restructuring before IMF lends any money.

Market analysts have said investors were heavily feeling the pinch of economic crisis as the country’s fuel bunkers have dried out the island nation was frantically looking for dollars to purchase fuel.

The public sector and the schools have moved online for two weeks on the government’s advice to reduce transport and save fuel.

Though a new prime minister and a new cabinet have been appointed, analysts see little progress on both the economical and political fronts. The country is struggling to ensure a continuous supply of fuel due to a shortage of US dollars.

The more liquid S&P SL20 index plunged 3.6% or 89.10 points to 2,381.09.

The market has so far lost 7.9% in June after gaining 6% in May. It lost 23% in April followed by a 14.5% fall in March.

The market has lost 39% so far this year after being one of the world’s best stock markets with an 80% return last year when large volumes of money were printed.

Sri Lanka’s sovereign debt default has already led the country to be rated with restricted/selective default rating by rating agencies, which has weighed on investor sentiment.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

Expolanka Holdings led the fall with slipping  7.8% to 177.3 rupees a share.

Browns Investment fell down 10.5% to 7.7 rupees a share, while LOLC Holdings eased 6.9% to 406.3 rupees a share. (Colombo/June 27/2022)