Sri Lanka stocks close lower, rupee steady

Sept 16, 2013 (LBO) – Sri Lanka’s stocks closed 0.3 percent down in a broad sell-off led by a a tobacco monopoly, and the rupee was steady, brokers and dealers said. LBO’s economic analyst fuss-budget says the rupee can come under renewed pressure if the Central Bank buys the dollars from the loan, generates tens of billions of rupees in money markets and does not defend the currency under its ‘flexible exchange rate’ policy.

The bond proceeds, to the extent that they are not used to settle any maturing liabilities or exiting bond investors is expected to help stabilize interest rates.

In gilt markets, a 5-year security bond maturing in 2018 was quoted around 11.85/88 percent down about 5 basis points from a day earlier.

In stock markets, Ceylon Tobacco Company fell 35 rupees to 1,085 contributing most to the index fall, followed by Sri Lanka Telecom, which down 2.0 rupees to 38.50.

Distilleries fell 2.20 to 180.00 rupees, JKH gained 1.30 rupees to 210.90, Commercial Bank fell 30 cents to 113.30 and Hatton National Bank gained 1.60 to close at 150.00 rupees.

The benchmark Colombo All Share Index closed 19.3 points lower at 5,730.12 down 0.34 percent. The S&P SL20 Index closed up 01.1 percent at 3,180.2, 3.5 points higher.

Turnover was 683 million rupees.

In forex markets the rupee was steady at 132.25/35 to the US dollar in the spot market, where trading had resumed.

The rupee had come under pressure in recent weeks due to the central bank’s ‘flexible exchange rate’ policy of not defending the peg after creating billions or rupees of excess liquidity either through dollar purchases or outright printing of domestic currency.

The central bank also cut the reserve ratio releasing tens of billions of rupees into bank reserves which when they become credit in the hands of the public eventually hits the forex market.

The market is expecting 750 million US dollars of proceeds from a bond by National Savings Bank to be remitted to the country this week.