ECONOMYNEXT – Sri Lanka stocks fell over 1.5 percent on Tuesday (05) to more than two-month low, after a gloomy picture on the economy given by Prime Minister Ranil Wickremesinghe in the parliament amid acute fuel shortage has almost grounded the economy to a halt, brokers said.

The main All Share Price Index (ASPI) closed 1.64% or 120.96 points lower at 7,238.59, the lowest since April 26.

“We saw some profit-taking today in Lanka IOC share shares as it continued to gain in the past few days. However, the market was mainly brought down by the PM’s speech,” a top market analyst said.

The PM said the GDP would shrink to 76 billion dollars in 2022 from 84 billion dollars, while the inflation to hit 60 percent by end of this year.

The market sentiment did not improve despite the PM informing the parliament that a staff-level agreement with IMF could be reached by August 2022 once the country presents a debt restructure plan.

Many public offices and all schools were closed on Monday due to a government decision to save fuel. Sri Lanka is facing the worst fuel crisis in its post-independent era.

Analysts have said the market had a lot of gloomy sentiments as investors did not know what to do as the market was under selling pressure with no takers.

Last week’s T-bill auction saw yields rising between 180-312 basis points, which also raised concerns among stock market investors.

Government has also declared that it can only provide fuel for essential services including health until July 10 and all non-essential services to work online as the country has run out of fuel.

The turnover was 916 billion rupees, less than a half of this year’s daily average turnover of 3.38 billion rupees.

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 more liquid S&P SL20 index dipped 2.21% or 51.84  points to 2,293.24.

The main ASPI has lost 1.4% in July so far after falling 9.3% in June, reversing a 6% gain in May. It lost 23% in April followed by a 14.5% fall in March.

The market has lost 40.8% 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.

The fall was led by the market heavyweight Expolanka, which fell 5.4% to 162.3 rupees a share.

Sampath Bank slipped 3.7% to 28.6 rupees a share, while Browns Investment closed weaker 4.2% at 6.80 rupees a share. (Colombo/July 05/2022)