So Far So Good

Sri Lanka enters the penultimate lap for its 2004 budget, with a great deal of apprehension as to whether Parliament will be dissolved on Tuesday midnight.
Finance Minister K N Choksy by Tuesday evening was still scheduled to present the 2004 budget in parliament on Wednesday at 2.30 pm. rn

rnThe air of speculation was high in Colombo – Sri Lanka
quote s commercial capital, with rumours that the President would go against her own word (as history tells us) and call for a snap poll or do something drastic to disrupt the process.rn

rnSo far PA parliamentarians and the President
quote s office have assured that Parliament would be re-summoned as scheduled and that they would back the budget. rn

rnHowever, positive vibes from the President
quote s office was not enough to sooth Colombo
quote s politically sensitive financial markets.rn

rnThe rupee hit an all year low of 97.00 to the dollar and the Colombo bourse ended with negative points on the board. rn

rnThe benchmark All Share Price Index closed 1.88 per cent or 22.7 points lower at 1186.7. rn

rnTurnover was at Rs. 354 mn, improving on Monday
quote s lacklustre Rs. 154.5 mn. rn

rnMarket capitalisation was marginally lower from Rs. 298.8 bn on Monday to Rs. 293.2 bn at the end of trading on Tuesday. rn

rnThe sensitive, the Milanka Index edged out 45.4 points of 2.1 per cent to close at 2148.5.rn

rnThe MBSL Midcap Index, also closed lower at 2474.4, down 38.4 points. rn

rnThe uncertainty also forced the rupee down against the dollar, reaching the lowest level for the year at Rs. 97.60 endash Rs. 97.75 levels.rn

rnMoney brokers said the spread between the bids and offers is currently around 15 cents and 20 cents on average, sometimes reaching a high of 30 cents since the political uncertainty kicked in early November.rn

rnPrior to the uncertainty, spreads were contained at an average of around four cents to five cents.rn

rnMoney brokers said dollar selling rates were the highest Tuesday at the Rs. 97.60 endash Rs. 97.75 levels, second only to the time the dollar was floated back in January 2001 when it hit the Rs. 98.00 levels. rn

rnPrevious highest dollar selling for the year was at Rs. 97.27 recorded in January 6, 2003. rn

rnThe rupee has risen steadily against the dollar over September and October in line with the US currency
quote s weakness against major currencies since February 2002. rn

rnThe three percent appreciation in September, however, sent shockwaves among exporters who have been encouraged with a government policy of a managed depreciation before the currency was floated. rn

rnIncreased aid and investment inflows also contributed in part to the rupee appreciation during the period.rn


-Shafraz Farook: shafrazf@vanguardlanka.comrn