Monday Markets: Bourse Suffers NFOs 7th Day
By Paneetha Ameresekere
The Bourse Suffered net Foreign Outflows (NFOs) for the seventh consecutive market day to yesterday due to sustained uncertainty with a figure of Rs 53.24 million, thereby increasing NFOs in the calendar year to Rs 48.33 billion. In the 211 market days that have transpired in the calendar year to yesterday, the bourse has suffered NFOs in 182 (86.26 per cent) of those days.
Nonetheless, the ‘common or garden’ ASPI made a pyrrhic gain of 1.49 per cent to 10,817.24 points and the so called ‘more sensitive’ S&P SL 20 Index by 0.64 per cent to 3,698.12 points on a Rs 6.15 billion turnover on a share volume of 223.97 million yesterday.
Last year, due to similar uncertainty, the bourse suffered a record Rs 51.04 billion worth of NFOs. In the 207 market days that transpired then, the bourse suffered a record NFOs in 90.82 per cent (188) of those days.
Money market was short for the 51st consecutive market day to yesterday, thereby causing persistent rate pressure, with market shortfall increasing for the 6th consecutive market day, this time by 3.87 per cent (Rs 1,215.74 million) to Rs 287,956 million.
Money market liquidity during yesterday’s trading decreased for the third consecutive market day, this time by Rs 21,705 million (US$ 107.80 million) due to the possible settlement/s Central Bank of Sri Lanka (CBSL’s) sales of US dollars from the country’s foreign reserves at Wednesday’s administered, albeit discounted price of Rs 201.34 to the US dollar to the market for the import of so called essential items and/or Government of Sri Lanka’s (GoSL’s) foreign debt servicing commitments and/or CBSL’s dollar sales and/or swaps to/with GoSL and/or CBSL’s swaps with the market.
MP Rs 1.79 trillion
GoSL’s non-demand pull inflationary face value money printing (FVMP) debt increased by Rs 10,984 million and its FVMP debt as a whole by 0.62 per cent to Rs 1,792,182.43 million (Rs 1.7922 trillion)yesterday. GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 83 market days to yesterday due to a lack of revenue.
GoSL’s at least theoretical MP borrowing costs decreased by 2.39 per cent (Rs 1,215.74 million) to Rs 49,735.17 million due to market preference to invest in riskless, low returns Treasury (T) Bonds and T Bills in secondary market yesterday, rather than invest in the lucrative private sector, the engine of growth, due to uncertainty.
CBSL’s open market operations (OMO) data don’t capture transactions between 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.
Dead 138 days
The interbank foreign exchange (FX) market was ‘dead’ for the 138th consecutive market day to yesterday with no outright transactions 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 dollar, aiding in the spawning of a black market.
Non-commercial consumer credit card trades such as for education and health may be executed at a premium of five per cent over the administered ER of Rs 203 to the dollar, leading to such trades being executed at the Rs 213-214 levels to the dollar.
Commercial trades with approvals, which may involve the passing of speed money have to be executed at the administered and discounted price of Rs 203 to the dollar, after, apparently dipping into the country’s Spartan foreign reserves, to meet such commitments.
Even at the Rs 213-214 levels the ER will have had depreciated by between Rs 24.50-25.50 (13-13.53 per cent) in the calendar year to yesterday and year on year (YoY) by between Rs 28.55-29.55 (15.48-16.02 per cent), thereby causing cost-push inflationary pressure as Sri Lanka is an import dependent economy.
At the controlled ER of Rs 203, the ER will have had depreciated by 7.69 per cent (Rs 14.50) in the calendar year to Friday and YoY by 9.38 per cent (Rs 17.40) to the dollar.