Record high inflation pulls down Bourse

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The Bourse, after gaining for three consecutive market days to Monday, fell yesterday, led by selling pressure by investors to reinvest in today’s, weekly, Rs 90 billion Treasury (T) Bill auction on expectations of better returns due to inflation being at a record high 66.6 per cent last month, according to data released by the Census and Statistics Department after markets closed on Monday. A high interest rate market is detrimental to the growth of the Bourse as investors would then turn to the former for better returns rather than the latter.

 Consequently, the ASPI fell by 0.18 per cent to 9.071.53 points and the S&P SL 20 Index by 0.60 per cent to 2,989.78 points on a Rs 4.93 billion turnover, yesterday. Yesterday was also the third consecutive market day that the Bourse made a turnover of over Rs three billion after a lapse of six days. The last time the Bourse made daily turnovers of over Rs three billion for at least three market days was from 4 August to 17 August, where for a total of nine consecutive market days, the Bourse made daily turnovers of over Rs three billion.  

The Bourse enjoyed net foreign inflows (NFIs), albeit nominal, for six consecutive market days to yesterday after 29 calendar days, with yesterday’s value being Rs 16.5 million. However, in the calendar year to yesterday it has suffered a net foreign outflow of Rs 1,095.7 million.

Meanwhile, prior to yesterday, the last time the Bourse enjoyed NFIs for at least six consecutive market days was from 14 July to 25 July, where, for eight consecutive market days in the review period, it enjoyed NFIs. Yesterday saw a total of 154.44 million shares changing hands.

‘Spot’ unchanged 36th day

The benchmark, albeit administered market ‘spot’ closed unchanged for the thirty sixth consecutive market day at
Rs 360/364 to the US dollar in two way quotes to yesterday (Tuesday 23 August), market sources told Finance Today.

Yesterday, the administered market ‘spot’ was down by between 78.22-79.31 per cent (Rs 158-161), year-on-year (YoY); thereby causing cost push inflationary pressure as Sri Lanka is an import dependent economy, they 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 GoSL, CBSL and or between the GoSL and/or CBSL with the market, which was fixed at Rs 361 to the dollar yesterday.

They further said, trades in the administered market ‘spot’ (Rs 360/364) 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 like 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  80.59 per cent (Rs 161.10).

By Paneetha Ameresekere