Tuesday Markets: NFOs Top Rs 45.58B

By Paneetha Ameresekere | Published: 2:00 AM Oct 27 2021

By Paneetha Ameresekere

The Bourse continued to make gains for the 7th consecutive market day amidst sustained net foreign outflows (NFOs) due to uncertainty, with the ASPI yesterday gaining by 0.80 per cent to 10,127.04 points, and the more sensitive S&P SL 20 Index by 0.41 per cent to 3,659.73 points on a Rs 6.72 billion turnover and on a share volume of 272.31 million. 

Nonetheless, the Bourse suffered NFOs for the third consecutive market day, with a figure of Rs 69.40 million yesterday, increasing NFOs in the calendar year to date to Rs 45.58 billion, a year on year increase of 2.96 per cent ( Rs 1.31 billion). In the 194 market days that have transpired in the calendar year to yesterday, the bourse has suffered NFOs in 168 (86.60 per cent) of those days. Last year the bourse suffered a record Rs 51.04 billion worth of NFOs due to similar uncertainty. In the 207 market days that transpired last year, the Bourse suffered a record NFOs in 90.82 per cent (188) of those days.

 Reserves Bleed $15.51M 

The country’s foreign reserves bled by a total of US$ 15.51 million (Rs 3,116 million) in the two market days to yesterday due to the possible settlement/s of Government of Sri Lanka’s (GoSL’s) foreign debt servicing commitments and/or Central Bank of Sri Lanka’s (CBSL’s) release of US dollars from the country’s foreign reserves at the discounted price of Rs 203 to the US dollar for the import of so called essential items and/or CBSL’s swaps with the market and/ or CBSL’s dollar sales/swaps to/with GoSL . CBSL lacks transparency in its open market operations data. 

GoSL’s) at least theoretical money printing borrowing costs (MPBCs) sharply decreased by 11.51 per cent (Rs 7,685.06 million) to Rs 59,068.12 million yesterday due to buying pressure on riskless, low returns Treasury (T) Bonds and T Bills in secondary market trading, rather than invest in the lucrative private sector, the engine of growth, due to sustained uncertainty. GoSL’s face value (FV) MP debt decreased by Rs 3,047 million (0.18 per cent) to Rs 1,731,591.03 million (Rs 1.7316 trillion) yesterday, thereby marginally defraying demand pull inflationary pressure as well. 

GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 66 market days to yesterday due to a lack of revenue. Money market was short for the thirty fourth consecutive market day to yesterday , thereby causing persistent rate pressure, with market shortfall increasing by 12.60 per cent (Rs 4,500 million) to Rs 177,678 million. 

Dead 121 Days 

The interbank foreign exchange (FX) market was ‘dead’ for 121st consecutive market day to yesterday, with no outright transactions taking place and with all trades in the FX market, ipso facto made worse by bank-client trades too, since midnight on 6 September, having to be executed under a controlled exchange rate (ER) regime of between Rs 202-203 to the US dollar, thereby aiding in the spawning of a black market. However, 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, sources said. 

But, commercial trades, with necessary approvals, which in several cases involve the passing of speed money due to the advent of the ‘licensing Raj,’ have to be executed at the administered and discounted price of Rs 203 to the dollar, they said. 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 date 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. Meanwhile, even at the controlled ER of Rs 203 had depreciated by 7.69 per cent (Rs 14.50) in the calendar year to yesterday and year on year by 10.09 per cent (Rs 18.60) to the dollar, thereby causing costpush inflationary pressure.

By Paneetha Ameresekere | Published: 2:00 AM Oct 27 2021

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