Ceylontoday, 2015-11-13 02:05:00 Read 218 Times
NET INFLOWS DRIVE UP MONEY MARKET
By Paneetha Ameresekere
Ceylon Finance Today: The foreign exchange (FX) market after a three market day breather received net inflows on Wednesday, thereby boosting market's excess liquidity by a massive Rs 3.1 billion to Rs 113.2 billion, and the country's foreign reserves by US$ 22 million, interpretation of open market operations data on that day showed.
As the Central Bank of Sri Lanka (CBSL) is the intermediary to such market activity, and as CBSL deals in "spot," Wednesday's inflows are as a result of the settlement of market transactions that took place two market days prior to Wednesday, i.e. on Friday, 6 November, 2015.
Conversions are done, based on the assumption, as per information supplied by the market, that the middle, "spot" rate of the US dollar as at 6 November was Rs 141.575.
Prior to Wednesday, the money market last enjoyed net inflows on 4 November, which was equivalent to a massive Rs 149.5 billion ($1.1 billion)*. This was in lieu of the receipt of the majority proceeds of the Government of Sri Lanka's (GoSL's) recent $ 1.5 billion sovereign bond sale to international capital markets, most of which was used to swell GoSL's foreign reserves (as a result, the money market as well, and the balance, probably to settle an import bill, such as say state owned Ceylon Petroleum Corporation's fuel bill and/or to meet GoSL's foreign debt servicing commitments and/or lodged in a Treasury foreign account.
Despite the current bloodbath in the stock exchange, mainly caused due to fears of what Budget 2016, due in another seven days' time would portend, the bourse, in the first two market days of the week ...has received net foreign inflows (NFIs) of Rs 190.5 million.
But those inflows have been spurred by one solitary stock, namely blue chip John Keells Holdings PLC, the market's largest capitalized stock, which, in those two market days, has gobbled up Rs 184.1 million worth of NFIs, comprising a massive 96.6% of total NFIs received by the bourse, in the first two market days of the week.
The Colombo Stock Exchange (CSE) has nearly 300 listed companies. If, of this number, only one stock is able to attract net inflows, then the situation is not viable. This is because Sri Lanka needs foreign capital to drive its economy, not least the bourse.
CSE Chairman Vajira Kulathilake, justifying the Exchange's foreign forays (the most recent was to Zurich that took place a few weeks ago) at taxpayers' expense, said at a forum held a few weeks ago, that such promotions are needed, because state owned enterprises are to be listed on the market, and players which have the necessary capital to invest in such stocks are only foreign investors.
Kulathilake further said that such sojourns are not with taxpayers' money, but stockbrokers' money. He however missed the bus in that stockbrokers earn their money by investments made in the bourse with taxpayers' money.
*Conversions are based on the assumption that the middle, spot rate of the dollar as at 2 November (the day such transactions were executed) was Rs 141.055 as per data supplied by the market to this reporter.