(Colombo) REUTERS: Sri Lankan shares rose on Wednesday while the rupee closed steady on hope of a rate cut by the Central Bank later this week, market sources said.
The Central Bank is widely expected to cut its key interest rates at a meeting on Friday, a Reuters poll showed, to support the economy after tourism and investment plummeted in the wake of Easter Sunday bombings.
Traders said the Easter day bombings and aftermath violence, and worries over slowing economic growth weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people.
Sri Lanka is unlikely to hit its full-year economic growth target of 3-4 percent following the Easter Sunday bombings, State Finance Minister Eran Wickramaratne told Reuters last week. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year.
The benchmark stock index ended 0.5 percent firmer on Wednesday at 5,319.83. It rose 0.67 percent last week, recording its first weekly gain in three. The bourse has fallen 12 percent so far this year.
Turnover was Rs.181.4 million, nearly a third of this year’s daily average of around Rs.560 million. Last year’s daily average was Rs.834 million.
Foreign investors bought a net Rs.35.4 million worth of shares on Wednesday, but they have been net sellers of Rs.5.58 billion worth of equities so far this year.
The rupee ended steady at 176.25/35 per dollar, market sources said.
Traders said forward and swap markets were active due to anticipation of a rate cut on Friday.
Analysts expect the rupee to weaken further as money flows out of stocks and government securities.
The rupee fell 0.23 percent last week but is up 3.6 percent for the year. Exporters had converted dollars as investor 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.2.1 billion worth of government securities in the week ended May 22, but the island nation saw a net foreign outflow of Rs.19.1 billion so far this year, central bank data showed.
Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds.