Sri Lanka stocks close 1.6-pct lower

Nov 05, 2009 (LBO) – Sri Lanka’s stocks closed 1.65 percent lower Thursday, falling for the third straight day in a continuing correction, despite banks reporting strong earnings in the September quarter season, brokers said.

Despite heading for polls in the first quarter of 2010, the government opted to have a ‘vote on account’ instead of an election budget loaded with goodies, amid weak tax collections from the people, which is expected to help the people.

A wage demand by state utilities was not granted last month. But the President announced a pay hike for the military yesterday.

Though interest rates are falling, credit growth is still low, with banks lending heavily to the government while the private sector stays in the sidelines.

Diversified John Keells Holdings closed down 4.00 rupees at 4.00. Aitken Spence Hotel Holding close flat at 215.00 rupees, Commercial Bank of Ceylon closed at 167.50 up 50 cents.

The benchmark Colombo All Share Index closed down 47.88 points lower at 2,954 and the Milanka Index of liquid stocks fell 1.06 percent (34.33 points) to 3,207.7 points according to the provisional Colombo Stock Exchange data.

Diversified Hayleys group which reported a turnaround closed down 150.0 down 0.75 percent.

Sampath Bank which reported a 35 percent increase in profits closed 174.25, up 25 cents.

“The question is how much of this increase is already factored into prices,” a market analyst said.

“The performance of banks, which were expected to make bond profits, was evident several months ago. The question is where do we go from here?”

A correction in the index was expected after the market doubled so far this year and became the second best performing market in the world with the benchmark index topping 3,000 points to an all time high.

Sri Lanka’s economy was hit by excessive government spending, triggered high inflation, and high interest rates in the midst of a global downturn.