Sri Lankan shares hit 5-week high; rupee edges up

Oct 03, 2016 (Reuters) – Sri Lankan shares edged up on Monday, hitting their highest in five weeks, led by blue chips as hopes of some improvement in macroeconomic fundamentals boosted investor sentiment, dealers said.

Sri Lankan shares were headed for a fifth straight session of gains, with the benchmark Colombo stock index rising 0.41 percent to 6,561.74 as of 0642 GMT. The index touched its highest intraday level since Aug. 26.

“The fiscal side seems to be really good,” said Danushka Samarasinghe, an economist and research head at Softlogic Stockbrokers. He added that hopes of future interest rate cuts on the back of easing consumer prices have been helping the sentiment.

Sri Lanka’s consumer prices rose 3.9 percent in September from a year earlier, at a slightly slower place than the previous month’s 4.0 percent, data from the Department of Census and Statistics showed on Friday.

Stock brokers said the market believed that the central bank’s tightening measures have started to bite. Central bank chief Indrajith Coomaraswamy’s positive comments published over the weekend in local newspapers also helped boost the sentiment, they said.

The central bank’s decision last week to hold key monetary policy rates steady, after tightening policy three times since December, suggested that policy makers were keen to support a slowing economy, analysts said.

Sri Lanka targets to cut its budget deficit to 4.7 percent of gross domestic product (GDP) in 2017 from 5.4 percent this year, Finance Minister Ravi Karunanayake told the International Monetary Fund last month.

Shares in conglomerate John Keells Holdings and top lender Commercial Bank of Ceylon were up 1.6 percent and 0.56 percent respectively.

Turnover was at 343.4 million rupees ($2.46 million).

The spot rupee edged up and was at 146.75/80 per dollar at 0650, compared with Friday’s close of 146.85/146.95.

“Dollar sales by exporters helped ease the downward pressure today. But the outlook remains the same and the seasonal importer demand could pressurise the currency to fall,” a currency dealer said asking not to be named.

The central bank is under pressure from the IMF to continue rebuilding international reserves and maintain exchange rate flexibility to develop the foreign exchange market further.