Indices inch higher in subdued trading

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The bourse saw a pyrrhic net foreign inflow (NFI) of a miserly Rs 192,608 at yesterday’s trading, while suffering a net foreign outflow of Rs 1.21 billion in the calendar year to date.

The superficiality of the bourse was further exposed, when, on a negligible Rs 690.48 million turnover on an innocuous 37.49 million share volume, the ASPI and the S&P SL 20s made inflated gains of 0.13 and 0.38 per cent to close at 7,512.15 and 2,409.81 points at yesterday’s trading.

‘Spot’ Unchanged

The benchmark, albeit administered market ‘spot’ remained unchanged to be trading at Rs 360/365 to the US dollar for the second consecutive market day to yesterday (Wednesday, 22 June), market sources told Finance Today.

However, two days ago on Monday (20 June), the administered market ‘spot’ strengthened by Rs 1 after nearly 26 months to close at Rs 359/364 to the dollar in two-way quotes due to slack demand, before weakening to Rs 360/365 to the dollar in two-way quotes the following day Tuesday (21 June) and remaining that way yesterday as well, they said.

Prior to Monday, the last time the exchange rate (ER) made gains was on 28 April 2021, where it was artificially strengthened by Central Bank of Sri Lanka (CBSL) by between Rs 3-4 to be trading at Rs 199/200 to the dollar in two-way quotes, where, however, trades were restricted to bank-client and not bank-bank, similar to the current state of affairs.

On 28 April 2021, the guided, market ER, like now, was the ‘spot,’ while on the previous day 27 April, 2021, the market ER was one month’s forwards which closed at Rs 202/204 to the dollar in two-way quotes.

In related developments, last year, Year-on-Year (YoY) to yesterday, where then too the administered, coupled with an inflexible ‘spot’ in operation, closed unchanged for the twenty fifth consecutive market day to Rs 199.75/200.25 to the dollar in two-way quotes on 22 June 2021.

Meanwhile, yesterday, the administered market ‘spot’ was down by between 80.23-82.27 per cent (Rs 160.25-164.75) YoY, thereby causing cost-push inflationary pressure, as Sri Lanka is an import-dependent economy, sources said.

The band in which the guided market ‘spot’ may currently operate is fixed at +/- three per cent of the officially administered ‘spot’ value, where the latter is applicable for transactions involving the Government of Sri Lanka (GoSL), CBSL and or between the GoSL and/or CBSL with the market, which was fixed at Rs 360.90 to the dollar yesterday.

They further said trades in the administered market ‘spot’ (Rs 360/365) yesterday were mainly restricted to ‘bank-client’ outright trades, while the interbank foreign exchange (FX) market was however dominated by swaps, which were outside the domain of the FX market for this purpose.

In related developments, the administered ‘spot’ for official purposes, such as for trades involving CBSL, GoSL and/or CBSL, GoSL and the market, YoY to yesterday has depreciated by 80.53 per cent (Rs 160.99).

Yesterday, the value of this official administered ‘spot’ was fixed at Rs 360.90 to the dollar, while a year ago it was Rs 199.91. Meanwhile, the straitjacketed, inflexible administered market ‘spot’ a year ago was fixed at Rs 199.75/200.25 to the dollar in two-way quotes, for the twenty fifth consecutive market day to yesterday, where it has administratively remained unchanged at those levels, YoY. ‘Spot’ trades are settled after two market days from the date of transaction. CBSL, the steward of GoSL debt and of its foreign reserves also deals in ‘spot.’

By Paneetha Ameresekere