Sri Lanka stocks head down, Com Bank falls further

Dec 08, 2008 (LBO) – Sri Lankan shares Monday opened the week lower on very low trading volumes with Commercial Bank falling for the second day after it revealed a hefty exposure in a crude oil hedge deal.

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The All Share Price Index fell 1.18 percent (18.48 points) to end at 1,548.69 while the more liquid Milanka fell 1.15 percent (20.00 points) to end at 1,720.54. Turnover was 31 million rupees.

Sujeewa Pieris of Bartleet Mallory Stock Brokers said high interest rates were keeping investors away from equities and in fixed income securities where returns are higher.

“Investors are not coming back to the market mainly because of high interest rates,” he said.

“Investors who have money are happy with fixed income securities and do not want to take a risk and get into equities given the global credit crunch and recession.”

Sri Lankan corporate earnings have been coming down and the future outlook is gloomy given high interest rates and inflation and slowing consumer demand, despite lower oil prices reducing costs.

Brokers said the market has been falling for several weeks on low trading volumes for lack of buying support with the few investors remaining in the market staying on the sidelines hoping prices will fall further.

Commercial Bank, the most actively traded stock, fell further on the back of last Friday’s fall when it revealed a hefty liability on account of delayed payments in an oil hedging deal.

Commercial Bank ended at 66.50, down over four percent or three rupees on small volumes after a six percent fall Friday.

The bank has said its exposure on the Ceylon Petroleum Corporation oil hedge deal is 982 million rupees with oil at 48 dollars a barrel, after payments were suspended by court.