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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Sri Lanka’s stocks nosedive after finmin’s speech; highest fall since February

Sri Lanka’s stocks nosedive after finmin’s speech; highest fall since February

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CITIZEN

CITIZEN
Manager - Equity Analytics
Manager - Equity Analytics
ECONOMYNEXT – Sri Lanka’s stock index closed 3.6 percent weaker on Wednesday (08), a day after Finance Minister Basil Rajapaksa revealed a grim reality about the economy, as investors booked profits amid margin calls, brokers said.
Wednesday’s loss was the largest percentage index fall since February 22, the bourse data showed.
Finance minister in his debut speech in the parliament said that Sri Lanka is facing severe external crisis as well as a domestic crisis with revenues falling and expenses continuing to rise. He also said the government will not borrow expensive loans and will only go for concessionary loans.
Related
Sri Lanka Finance Minister says country facing twin external and domestic crises
The multiple crisis come amid Coronavirus pandemic and unprecedented money printing which has triggered a plethora of economic controls.
The country’s risky assets have unusually gained partly due to record low-interest rates, excess liquidity in money markets, and some businesses being disrupted due to import controls triggered by money printing. The trend of net foreign selling has been continuing since early last year.
Analysts had expected a market fall with the central bank’s unexpected monetary tightening measures since August 19 and successive increase of a ceiling yield on 12-month Treasury bills.
“The margin calls is one reason for the market fall,” a broker said.
“And the other reason is the rates of the rupee. Yesterday the central bank quoted rupee around 200 rupees against US dollars and that has brought a negative impact to the market.”
The broker said the import and export industry has impacted due to mismatch between the dollar rate quoted by the central bank and the rate at which importers can buy.
Brokers said, if a market correction starts, the market will fall by 10-15 percent.
The index closed 328.53 points down at 8,764.21 points. It continued to fall throughout the day and fell to a daily low of 8,660.85.
The S& P SL20 index of more liquid stocks fell 2.33 percent or 79.48 points to close at 3,335.98.
Foreign investors sold a net 244 million worth of shares on Wednesday, and the market has suffered a net foreign outflow of over 41.1 billion rupees so far this year.
The day’s turnover was 10.4 billion rupees, well over this year’s average daily turnover of around 4 billion rupees.
The fall was led by, Expolanka Holdings, LOLC holdings and Brown Investments, which have been on the rise in August on speculation that their dollarized assets were going to increase the profitability despite economic hardships.

Expolanka Holdings, the market heavy weight which has the highest market capitalization in the market and a significant export component in its business, fell 6.27 percent to close at 172.00 rupees.

J-CAT likes this post

chandike73

chandike73
Manager - Equity Analytics
Manager - Equity Analytics
" Overall I see 2 reasons for the Market downfall.
1.Chinese PM visit was expected around 15th.
With that many proposals for Investment in PortCity was to be announced and a huge amount to be given to government for our Reserve’s to be supported.
With that news BIL & LOLC group shares had a run.
Now PM’s visit still no clarity whether he is coming now or later,or our Prez will visit China or have a Zoom session and announce and start PortCity operations.
So from yesterday rumour is visit is delayed.
Hence BIL & It’s Group shares started to drop and with that it’s Index heavy and gave a wrong signal for the market and all others also followed to drop.
2.Other issue was yesterday’s CB circular to Banks to peg the Dollar to 200-203, which banks was selling around 220-225
That gave a shockwave and started to wonder what will happen to dollar based companies?
Look June results came with around 200 bank rates for Exports and now after this circular still they will get 200-203 rates for September quarter results.
Only for a week or two Banks started giving a higher rate.
That’s was a speculative rate,like in the black market rate went up to 240 levels and now that also come down.
So there is no loss for exporters,it’s the same.
But market has not factored the positives 
1.Covid numbers are coming down from close to 6k to below 3k,so we have bend the curve and vaccination drive is very successful with over 13M single dose and 10M double dose.
2.Reserves from a bad situation 2.8B has improved to 3.8B and in 2 weeks it will go to 5.3B with a 1.5B from China.
3.Passing of Amnesty and SEC bills.
4.Tourism to start now, that will give the necessary dollar boost.
5.PortCity to start from this month.
6.Ground work is done for major take off for Investments.
Passing following bills,
PortCity 
Exchange control 
Strategic Investment-Through Selendiva Investments to be listed.
Amnesty 
SEC 
ANC to CB Governor 
BR - Finance Minister
These I am seeing it as very positive for market development and country.
2022 will be take off and good times IA for SL for a long period. "

nigma, samaritan, RajapaksaDON and mah2903 like this post

chandike73

chandike73
Manager - Equity Analytics
Manager - Equity Analytics
Quoted by ASI

samaritan


Moderator
Moderator
@chandike73 wrote:Quoted by ASI
Following is an interesting observation & food for thought:


"June results came with around 200 bank rates for Exports and now after this circular still they will get 200-203 rates for September quarter results."


_________________




The biggest risk in life is not taking any risk at all.

D.G.Dayaratne


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
I think Fin Minister's speech is a repetition Every one knows it except few govt MPs They were also lying knowing correct facts

 Anyway I agree with Chadike 73

NO ONE Can hoodwink MARKET FORCES. ONE day we have to face reality

WE HAVE TO UNDERSTAND WHAT IS MARKET ECONOMY I Chinese people 
can understand WHY WE CAN't?



Last edited by D.G.Dayaratne on Thu Sep 09, 2021 5:29 pm; edited 2 times in total (Reason for editing : to correct my opinion)

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