Monday Markets: NFOs Rs 49.81B
By Paneetha Ameresekere
The bourse suffered Net Foreign Outflows (NFOs) for the 12th consecutive market day to yesterday due to sustained uncertainty with a figure of Rs 12.35 million, thereby increasing NFOs in the calendar year to Rs 49.81 billion. In the 216-market days that have transpired in the calendar year to yesterday, the bourse has suffered NFOs in 187 (86.45 per cent) of those days.
Nonetheless, the ‘common or garden’ ASPI made a pyrrhic gain of 0.04 per cent to 11,202.09 points, and the so called ‘more sensitive’ S&P SL 20 Index by 0.18 per cent to 3,829.65 points on a Rs 8.97 billion turnover on a share volume of 343.29 million yesterday.
FVMP Debt Rs 1.79 trillion
Government of Sri Lanka’s (GoSL’s) Face Value Money Printing (FVMP) debt decreased by Rs 20,897 million (1.16 per cent) to Rs 1,787,161.88 million (Rs 1.7872 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 88-market days to yesterday due to a lack of revenue.
GoSL’s at least theoretical MP borrowing costs sharply decreased for the second consecutive market day to yesterday, this time by 2.62 per cent (Rs 1,256.65 million) to Rs 46,757.77 million due to market preference to invest in riskless, low returns Treasury (T) Bonds and T-Bills in secondary market trading, rather than lend to the private sector, the engine of growth, due to sustained uncertainty.
Money market was short for the 56th consecutive market day to yesterday, thereby causing persistent rate pressure, though market shortfall fell by 11.81 per cent (Rs 35, 187 million) to Rs 262,807 million.
Money market liquidity during yesterday’s trading increased by Rs 14,920 million (US$ 71.11 million) due to the possible settlement/s of GoSL’s sales of US dollars to the Central Bank of Sri Lanka (CBSL) at Thursday’s administered, albeit discounted ‘spot’ price of Rs 200.97 to the dollar and/or CBSL’s swaps with the market.
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 143 days
The interbank Foreign Exchange (FX) market was ‘dead’ for the 143rd 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.
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 yesterday (Monday) and year on year by between 9.61-9.43 per cent (Rs 17.80-17.50) to the dollar, respectively.
Due to milder controls a year ago where the market operated a dual exchange rate regime, the administered ‘spot’ and the ‘spot next,’ respectively, with their respective values being Rs 185.00/20 and Rs 185.20/50 to the dollar in two way quotes, then. ‘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.’ FVMP debt is equivalent to CBSL’s Treasury T-Bill and T-Bond holdings. Investments in T-Bills and T-Bonds are considered risk free because in the event GoSL is unable to honour such debt repayments, CBSL is mandated to print demand-pull inflationary money and settle such creditors. CBSL is the sole, mandated authority to print money.