Oct 28, 2008 (LBO) – Sri Lankan shares plunged Tuesday with heavy losses in some blue chips as investors sold on fears of worsening company profitability and the uncertainty keeping away buyers, brokers said.
The All Share Price Index fell 4.94 percent (90.38 points) at 1,740.44 while the Milanka tumbled 6.17 percent (127.20 points) to 1,935.25. Turnover was 134 million rupees.
Brokers said investors were reluctant to buy even if prices look attractive because of fears a global recession will affect the local economy and erode company profits.
Also, retail investors were reluctant to borrow and play the stock market at prevailing high interest rates, given the uncertainty in the market.
“There’s no buying support,” said Sujeeva Peiris of Bartleet Mallory Stock Brokers.
“Investors, including institutions, are on the sidelines.”
Dialog Telekom fell almost 10 percent or 75 cents to seven rupees with 776,800 shares traded while Sri Lanka Telecom lost over eight percent or three rupees to end at 34 rupees on small volumes. John Keells Holdings, the most actively traded share, lost 1.75 rupees to end at 63.25 rupees with 295,900 shares changing hands.
Distilleries Company lost 5.66 percent or three rupees to close at 50 rupees with 193,800 shares traded.
Sri Lankan shares fell despite a rally in other battered Asian stock markets after several days of heavy losses as investors hunted for bargains despite continued worries about the ailing global economy.
Peiris of Bartleet Mallory Stock Brokers said local investors were also worried about fears of a global recession and plunging commodity prices.
Falling tea prices at the Colombo auction might affect the profitability of listed regional plantations companies some of whose share prices weakened.
“Investors were closely monitoring the auctions. Today too tea prices were down and stocks piled up. So there’s concern about plantations.”
Brokers said interest rates which are expected to remain high was also having a dampening effect on the stock market, keeping money in high yield bonds and investors reluctant to trade on borrowed funds.
They said today’s plunge in the market might cause some forced selling even at a loss by margin traders Wednesday as the value of portfolios fell.
About two million shares of Janashakthi Insurance were done at 10 rupees in a crossing although the market price was at 8.50 rupees.