(Colombo) REUTERS: Sri Lankan shares closed at a more than six-week high yesterday, boosted by foreign inflows into equities, while the rupee ended slightly firmer on dollar sales by exporters.
The benchmark stock index ended 0.31 percent firmer at 5,392.30, its highest close since May 3. The bourse rose 1.61 percent last week, but has dropped 10.91 percent so far this year.
Sri Lanka’s economy picked up to 3.7 percent in first quarter 2019, government data showed yesterday.
Sri Lanka’s Finance Minister Mangala Samaraweera on Tuesday said the economy grew at 3.5 percent in the first quarter recovering from 1.8 percent in the previous quarter.
The Central Bank cut its key interest rates on May 31 to support a faltering economy as overall business and consumer confidence slumped following deadly bomb attacks in April.
Sri Lanka is unlikely to hit its full-year economic growth target of 3-4 percent following the bombings, junior finance minister Eran Wickramaratne told Reuters last month. A Reuters poll has forecast growth to slump to its lowest in nearly two decades this year.
The government’s pension fund has resumed investing in risky assets as the stock market is “extremely undervalued at the moment and is considered a good time to go in”, the Central Bank governor said last month at its monetary policy meet.
Yesterday’s stock market turnover was Rs.542.01 million, in line with this year’s daily average of about Rs.550.6 million. Last year’s daily average was Rs.834 million.
Foreign investors bought a net Rs.178.5 million worth of shares yesterday, first net buying in eight sessions. They have sold a net Rs.522.6 million for the seven days through Tuesday. The year-to-date net foreign outflow is at Rs.5.87 billion.
The rupee ended at 176.65/80 per dollar, compared with Tuesday’s close of 176.80/85, market sources said.
Analysts expect the rupee to weaken further as money flows out of stocks and government securities.
The rupee fell 0.14 percent last week, but is up 3.39 percent for the year. Exporters had converted dollars as investors’ confidence stabilised after a US $ 1 billion sovereign bond was repaid in mid-January.
The rupee dropped 16 percent in 2018 and was one of the worst-performing currencies in Asia.
Foreign investors bought a net Rs.311 million worth of government securities in the week ended June 12, but the island nation’s net foreign outflow was at Rs.21.6 billion so far this year, the Central Bank data show.