COLOMBO: Sri Lankan shares gained for a third session on Thursday hovering at their highest in six weeks as retail investors bought beaten-down stocks, but concerns over economic woes capped gains, brokers said.
The benchmark share index was up 0.89 percent at 6,219.66 at 0809 GMT, its highest since Feb. 25.”It has been mainly retail buying. Retail investor interest has been a bit high on fallen shares. They feel this is the best price they can enter into the market,” a stockbroker said, asking not to be named.
Analysts, however, said investors are cautious about macroeconomic uncertainty after a rating downgrade and unclear capital gains tax. Sri Lanka on Friday postponed a plan to reintroduce capital gains tax by six months after the move threatened to dent foreign investor sentiment. Stockbrokers said the concern now is how the government is going to impose the tax, rather than the tax itself.
Higher market interest rates and higher borrowing by the island nation facing a balance-of-payments crisis have also weighed on investor appetite for risky assets, dealers said.
The average weighted prime lending rate has risen 84 basis points to 9.19 percent through Friday since Feb. 19, when interest rates were increased by 50 basis points, central bank data showed. Investors preferred fixed interest rate bearing assets over shares due to a rise in interest rates.
Analysts and economists worry slower growth could reduce corporate earnings of some listed firms.
Turnover stood at 641.2 million rupees ($4.44 million).
The rupee spot next traded steady at 144.90/145.10 hardly changed from Wednesday’s close of 144.90/145.20.
“A state bank sold spot next at 144.50 to keep the rupee steady,” a currency dealer said.
The spot rupee, which has not been active since Jan. 27, was not actively traded. The central bank has fixed the spot rupee’s trading price at 143.90 through moral suasion, dealers said. Central bank officials were not available for comment. The rupee has been under pressure due to foreign investors exiting government securities and amid the country’s economic woes.
Sri Lanka borrowed 25 percent more in 2015 than it did in 2014 due to high cost of refinancing loans raised by the previous government without parliamentary approval.
