Nov 24, 2008 (LBO) – Sri Lankan stocks began the week on a dreary note with the market continuing its downward march Monday on low trading volumes and brokers saying the bearish trend could continue. Liyanage said investors were also shifting funds from equities to debt, where returns are higher, but find they are stuck in their share investments with no buyers to sell to.
Even the recent gains on the war front have failed to revive sentiment, as they were overshadowed by economic difficulties, Liyanage said.
The Sri Lankan army has advanced deep into Tamil Tiger-held territory, capturing a key supply route to the northern Jaffna peninsula, and laying siege on the rebels’ Kilinichchi stronghold.
Banks were expected to suffer with bad loans going up and profits falling as the economy slowed and plantations companies also reporting lower earnings as commodity prices crashed.
Manufacturing companies have been struggling with escalating costs with inflation staying stubbornly high.
The All Share Price Index fell 0.88 percent (14.69 points) to end at 1,655.19 while the more liquid Milanka was down 1.15 percent (21.55 points) to 1,848.71. Turnover was 71 million rupees.
Srimal Liyanage of Lanka Securities said the shares of most top and middle level firms based on market capitalization lost value.
The outlook for stocks remained bearish given the difficult economic conditions that are eroding corporate profitability, he said.
“There’s a lack of buying power among investors,” said Liyanage.
Some investors had kept buying as the market came down, in a strategy aimed at averaging their portfolios and selling at a profit when the market recovered.
But these investors too have also stopped buying as the market continues to slide.