Nov 25, 2008 (LBO) – Sri Lankan stocks sank further Tuesday on thin volumes with active trading in Dialog Telekom, a market heavyweight which recently posted its first quarterly loss.
The All Share Price Index fell 1.81 percent (29.94 points) to end at 1,625.25 while the more liquid Milanka was down 1.52 percent (28.19 points) to 1,820.52. Turnover was 106 million rupees.
Brokers said the outlook for stocks remained gloomy as interest rates remained high, which along with high inflation was eroding corporate profitability.
“Any sign interest rates are going to come down will see funds coming back into the market,” said Sujeewa Pieris of Bartleet Mallory Stock Brokers.
“Though we see major fluctuations in world markets, here the problem is interest rates which are causing the damage. Interest rates are high and show no sign of coming down.”
High interest rates are making investors put their money in fixed income securities rather than shares.
Investors were also reluctant to borrow and invest in equities for fear of not getting adequate returns.
“Investors who want to borrow and invest are also reluctant because of high interest rates,” said Pieris.
But interest rates are not seen coming down soon because of heavy government borrowing to fund the military campaign against the Tamil Tigers and for badly needed infrastructure projects.
Dialog Telekom, the most actively traded stock and most active in terms of volume, closed 25 cents lower at 6.25 rupees, the price at which most of the 2.1 million shares were traded Tuesday.
John Keells Holdings fell 25 cents to close at 63.75 rupees