Shares end at 22-month low; rising rates weigh

REUTERS: Sri Lankan shares fell to 22-month lows yesterday on low volume as rising market interest rates dampened market sentiment and forced some investors to shun risky assets. Sri Lanka’s benchmark share index closed 0.2 percent, or 12.17 points weaker at 6,191.81, the lowest close since April 29, 2014.

The index remained in the oversold territory for the fifth straight session, with the 14-day relative strength index at 27.170, Thomson Reuters data showed. A level between 70 and 30 indicates the market is neutral. “The market continued its slow downtrend and selling pressure is continuing,” said First Capital Equities (Pvt.) Ltd Head of Research Dimantha Mathew.

“Investors are awaiting to see the local interest rates and a statement from International Monetary Fund (IMF).” On Wednesday, 182-day and 364-day T-bill yields rose 50 to 55 basis points at a weekly auction to over two-year high, after the Central Bank raised key policy rates by 50 basis points from record lows. Sri Lanka is in initial talks with the IMF about a loan amid concerns over pressures on its balance of payments, outflows from government bonds and a ballooning fiscal deficit.

Turnover was Rs.443.9 million yesterday, well below this year’s daily average of Rs.709.3 million.Foreign investors were net buyers for the second straight session. They bought Rs.158.7 million worth of shares yesterday. Shares in Nestle Lanka PLC fell 1.88 percent, while Lion Brewery PLC slipped 5.77 percent.