Investors Lose Rs 56.47B in 7 days

The Colombo Share Market fell for the seventh consecutive market day yesterday, its second longest fall for the year to date, weighed down by perceptions of political instability impacting on local investor sentiment.

These perceptions are led by revelations emerging in the ongoing probe into the Treasury Bond scandal in which Foreign Minister Ravi Karunanayake is now facing allegations.

Premier Ranil Wickremesinghe’s name has also reportedly been mentioned in messages recovered from the telephone used by Arjun Aloysius whose company Perpetual Treasuries is being investigated in the alleged Bond scams.

This is leading to concerns that Government’s stability could be shaken.

As a result shareholders have lost Rs 56.47 billion during this period, while the benchmark ASPI during this period has fallen by 1.91% to 6,567.43 points, the more sensitive S&P SL 20 Index by 1.40% to 3,784.51 points.

Meanwhile Senior Economist Dr. Lalithasiri Gunaruwan added that performances of the stock market are not an indicator of the economy, but claimed that the government has been bad at financial management.

He told Ceylon Today, “I don’t think any economic fundamental was good recently. This government was a total failure in managing foreign balance.”

Hardly two weeks ago for similar reasons, and additional fears that the Central Bank of Sri Lanka (CBSL) would raise its policy rates due to IMF prodding, the market fell six consecutive market days between 17 July to 24 July, its third longest fall this year.

That period excludes the weekend and other holidays if any, that would have had fallen in between, as the stock market is closed for business on those days.

Rising rates make the fixed income market more attractive for investments at the expense of the stock market.

Nonetheless, CBSL at its monetary policy meeting last Wednesday held its policy rates unchanged for the fifth consecutive month at 8.75% and 7.25% respectively.

But in a double blow, foreign investments in Treasury Bonds and the T-Bill market (government securities market-GSM) for the first time after four weeks suffered a net foreign outflow of Rs 163 million in the week ended Wednesday, 2 August. In the interim the GSM had enjoyed net foreign inflows (NFIs).

Market sources told this reporter that the T-Bond scandal threatens to upset good economic fundamentals built recently.

They said that whereas the GSM had enjoyed NFIs of Rs 50 billion in the past three months, ‘if this trend is reversed, that will spell doom to the exchange rate and interest rate regimes where the former has been stable and the latter falling,’ they said.

The exchange rate in the benchmark ‘spot’ fell by between five and 15 cents on Friday to close at Rs 153.40/50 to the US dollar in two way quotes over Thursday’s close due to import demand, market sources said.

Meanwhile, the longest stretch that the stock market has fallen thus far for this year is for eight consecutive market days from 7 March to 16 March. That fall was precipitated by the market fearing that the CBSL would raise its policy rates, which became a reality at CBSL’s monetary policy review on 24 March when rates were raised by ¼% each with its key lending rate increased to 8.75% and its deposit rate to 7.25% respectively.

Nonetheless, the stock market in the calendar year to date has witnessed a NFI of Rs 26.53 billion.

Meanwhile, Economist Dr. Lalithasiri Gunaruwan added that stock market performances were not an indicator of the economy, but claimed that the government has been bad at financial management.

He told Ceylon Today that “I don’t think any economic fundamental was good recently. This government has been a total failure in managing foreign reserves”