Bourse Continues to Make Pyrrhic Gains

By Paneetha Ameresekere | Published: 2:00 AM Dec 8 2021

By Paneetha Ameresekere

The bourse continued to make pyrrhic gains for the second consecutive market day to yesterday, in a scenario where the bourse has suffered its second largest net foreign outflow (NFO) for a year to date in its 125-year history due to sustained uncertainty, with the so called, common or garden benchmark ASPI increasing by 0.49 per cent to 11,088.17 points and the so called sensitive S&P SL 20 Index by 0.44 per cent to 3,964.42 points on a Rs 6.02 billion turnover and on a 873.15 million share volume. The bourse suffered an NFO of Rs 38.54 million yesterday and in the calendar year to date to Rs 50.15 billion, its second largest ever, with its highest t being Rs 51.04 billion established last year due to similar uncertainty . 

Dead 149 days 

The interbank foreign exchange (FX) market was ‘dead’ for the 149th consecutive market day to yesterday (Tuesday), with no outright transactions of worth taking place, coupled with all trades in the FX market, including bank-client trades too, since midnight 6 September, mandated to be executed under a controlled exchange rate (ER) regime of between Rs 202-203 to the US dollar, aiding in the spawning of a black market. In the black market, the dollar was being traded at Rs 250 a unit; sources told this reporter on Sunday (5 December), a year-on -year (YoY) depreciation of Rs 63.50 (34.05 per cent) and in the calendar year to yesterday (Tuesday), by Rs 61.50 (32.63 per cent). 

Another first was that a person abroad who wants to gift a vehicle to a relative in Sri Lanka is precluded from so doing, even after being willing to pay the necessary import taxes to Customs in dollars, a situation that didn’t arise even when Sri Lanka last practised a closed economy prior to this, 44 years ago, from 1970-77. A year ago, the benchmark ‘spot’ was trading at Rs 186.20/50 to the dollar in two way quotes and as at last year end, due to milder controls, “the ‘spot’ and up to one week’s forwards,” was trading at a superimposed fashion of Rs 187.50/188.50 to the dollar in two way quotes.

 Liquidity up Rs 9.30B 

Money market liquidity during yesterday’s trading increased by Rs 9,303.2 million (US$ 46.41 million), vis-à-vis, at the discounted ‘spot’ price of Rs 200.45 to the dollar as at Friday, due to the possible settlement/s Government of Sri Lanka’s (GoSL’s) dollar transactions with the Central Bank of Sri Lanka (CBSL) and/or CBSL’s swaps with the market. 

FVMP Debt: Rs 1.82 Trillion 

GoSL’s face value money printing (FVMP) debt decreased by Rs 1,693.20 million to Rs 1,816,003.58 million (Rs 1.8160 trillion), thereby marginally defraying demand-pull inflationary pressure as well. GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 94 market days to yesterday due to a lack of revenue. 

MPBCs down 8th Day 

GoSL’s at least theoretical MP borrowing costs fell for the eighth consecutive market day to yesterday, this time, too, sharply, by 0/91 per cent (Rs 399.52 million) to Rs 43,698.48 million, vis-à-vis the rate of the fall in GoSL’s FVMP debt in percentage terms, driven by persistent uncertainty, resulting in market preference to invest in riskless, low returns Treasury (T) Bills and T-Bonds, rather than lend to the lucrative private sector, the engine of growth. 

Short 62nd Day 

Money market was short for the 62nd consecutive market day to yesterday, thereby causing persistent rate pressure, though market shortfall fell by 2.33 per cent (Rs 7,610 million) to Rs 318,455 million. CBSL’s open market operations (OMO) data don’t capture transactions between Central Bank of Sri Lanka (CBSL) and other central banks, Asian Clearing Union and the IMF. Transactions between GoSL and CBSL are foreign reserves neutral. CBSL is not transparent in its OMO data. ‘Spot’ trades are settled after two market days from the date of trading. CBSL, the steward of GoSL debt and of its foreign reserves deals in ‘spot.’

By Paneetha Ameresekere | Published: 2:00 AM Dec 8 2021

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