Sept 30, 2008 (LBO) – Sri Lankan shares fell sharply Tuesday pulled down largely by the slide in the two heavyweight telecom stocks on earnings fears as investors remained nervous about the local and global economy, brokers said.
On the Colombo bourse, Tuesday, foreign participation was less than yesterday with foreign sales amounting to 7.4 million rupees and purchases 31.2 million rupees.
Local sales amounted to 114 million and local purchases 90 million rupees.
Dialog Telekom, the most actively traded stock Tuesday, ended almost six percent lower, falling 50 cents to eight rupees with some half-a-million shares traded.
Sri Lanka Telecom fell 1.19 percent or 50 cents to close at 41.50 rupees.
Competition in the telecom market is intensifying while costs have been rising, leading to fears of lower earnings in future, as companies cut prices.
Brokers said investors were uncertain about the impact of Dialog Telekom’s shift to per second billing, from billing per minute.
“The market does not have much confidence it will generate revenue,” said a broker. “It may retain customers but it’s bound to have an impact on the bottom line.”
Distilleries Company, about which there has been concern because of the pending court case over the privatization of Sri Lanka Insurance Corporation, fell 3.46 percent or 2.50 rupees to 68.75 rupees.
Meanwhile, Touchwood Investment, a forestry firm, announced a one for one rights issue at sixty rupees per share.
The company said in a stock exchange filing that it aims to expand the acreage under cultivation and to introduce new timber species.
“This will necessitate clearing of land, planting and maintaining the new cultivation and the accompanying nursery operations, and setting up of laboratories to strengthen technical expertise.”
Ceylon Theaters said it had acquired the 10 percent stake held in CT Land Development by subsidiary Cargills (Ceylon) as part of the re-structuring within the group.
It said in a stock exchange filing that it also bought the Cargills (Ceylon) stake in group firm Lanka Ceramic.
Ceylon Theatres said it also sold its stake in Cargills Quality Foods to Cargills (Ceylon).
The transactions meant that the entire holding of the Ceylon Theaters Group in CT Land Development and in Lanka Ceramic is directly held by Ceylon Theatres, the holding company, and the entire holding in the food and beverage sector is consolidated under Cargills (Ceylon).
The All Share Price Index fell almost two percent (43.27 points) to 2,142.26 while the Milanka was down 2.26 percent (55.43 points) to 2,397.19. Turnover was 122 million rupees.
The slide meant the market lost 14.1 billion rupees in value with market capitalisation down to 699.3 billion rupees.
Mohan Thangarajah of First Guardian Equities said investors remained worried about company earnings.
“Foreign funds were also selling out of blue chips and the bond market, which could lead to a weaker rupee that would also make their portfolios in local stocks worth less.”
The slump in the Colombo bourse came as most stock markets around the world crashed Tuesday after US lawmakers unexpectedly rejected a multi-billion-dollar bailout of beleaguered financial institutions.
Most Asian indices closed sharply lower on Tuesday after a record plunge on Wall Street overnight.