Sri Lanka stocks fall on profit taking

Jan 27, 2009 (LBO) – Sri Lankan share prices fell on profit taking Tuesday after a sharp rise the day before, but Commercial Bank gained on a court ruling that ended a freeze on oil hedge payments by the state oil refiner.

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The All Share Price Index fell 0.94 percent (17.07 points) to end at 1,800.99 while the more liquid Milanka eased 0.37 percent (7.53 points) to close at 2,015.42.

Turnover was 103 million rupees.

Sujeewa Pieris of Bartleet Mallory Stock Brokers said a correction was expected after Monday’s sharp rise following news of further military gains against the Tamil Tigers over the weekend.

“The market went up on Monday, so there was a little bit of profit taking today,” he said.

Also, he said, Monday’s rise was mostly driven by small investors who lacked the financial muscle to sustain the momentum, with institutional buyers still largely out of the market.

Denials by two parties named in a media report as showing interest in taking control of Seylan Bank also dampened investor enthusiasm.

Commercial Bank gained with news of a supreme court decision that paved the way for the state petroleum refiner, Ceylon Petroleum Corporation (CPC), to resume payments to it on oil hedges.

The payments had been suspended by court order, exposing the bank to sizeable liabilities to counter-parties.

Commercial Bank, in stock exchange filings, has said its exposure to CPC in a direct deal was around 8.9 million US dollars and that its exposure to state-run People’s Bank in another deal was around 21.6 million US dollars.

Commercial Bank’s stock price ended up 2.34 percent (2.25 rupees) at 98.25, on a volume weighted average price, after hitting 99.75.

“The court decision on the oil hedging case gave a bit of a boost to the banking sector, especially Commercial Bank,” said Pieris.

Pieris said the market might still maintain its upward momentum albeit with corrections brought about by profit taking.

Investor sentiment has improved with the military gains against the Tigers that have seriously weakened the rebels.

But worries over company earnings and the economy remain given the global economic slowdown.