Monday Markets: NFOs Top Rs 1.7B

By Paneetha Ameresekere | Published: 2:10 AM Jan 11 2022

By Paneetha  Ameresekere

The bourse suffered net foreign outflows (NFOs) for the third consecutive market day to yesterday, this time by Rs 16.92 million, due to sustained uncertainty, increasing NFOs in the calendar year which has experienced only six market days to Rs 1.70 billion.

However, this and other repatriable proceeds, comprising a grand total of US$ 400 million, are stuck without being repatriated due to the country’s US dollar shortage, market sources told this reporter.

Last year, due to similar uncertainty, the bourse suffered a record Rs 52.57 billion worth of NFOs and in the previous year 2020, its second highest, Rs 51.04 billion, increasing NFOs in the two years to end 2021 to a record Rs 103.61 billion.

Subsequently, the ASPI fell by 1.23 per cent to 13,117.07 points and the S&P SL 20 Index by 0.23 per cent to 4,544.43 points on a Rs 8.81 billion turnover and on a 362.63 million share volume yesterday.

MPBCs Fall

 Government of Sri Lanka’s (GoSL’s) at least theoretical money printing borrowing costs (MPBCs) relative to the decline in its face value (FV) MP debt accelerated by 2.90 per cent (Rs 1,314.35 million) to Rs 43,997.79 million due to buying pressure of riskless, low returns Treasury (T) Bonds and T Bills in secondary market trading yesterday, rather than invest in the lucrative private sector the engine of growth due to sustained uncertainty.

GoSL’s face value money printing (FVMP) debt decreased by 0.65 per cent (Rs 12,609 million) to Rs 1,925,413.55 million (Rs 1.9254 trillion) yesterday, thereby negating demand pull inflationary pressure to an extent.

Market liquidity  yesterday  was uplift by Rs 12,544 million (US$ 62.39 million) due to GoSL’s transactions with CBSL at the discounted, administered, “benchmark”  “spot” rate of Rs 201.05 to the  dollar as at  Thursday. Transactions between GoSL and CBSL are foreign reserves neutral. CBSL is nontransparent in its open market operations.

GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 118 market days to yesterday.  Also, GoSL’s highest to the ninety first highest FVMP debt has been registered in the 91 consecutive market days to yesterday, though not necessarily in a particular order.

Money market was short for the 86th consecutive market day to yesterday, with this shortfall increasing by 0.02 per cent (Rs 65 million) to Rs 424,513 million yesterday, causing nagging rate pressure.

Dead 173 Days

The interbank foreign exchange (FX) market was ‘dead’ for the 173rd consecutive market day to yesterday, 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 dollar, aiding in the spawning of a black market.  

The spawning of the current closed ER regime underlined by hardly any trades being conducted in the interbank FX market began on 28 April 2021. However, in the interim period, ie from 28 April to 6 September 2021, bank-client trades were allowed to be executed at rates determined by the two parties in question, till the clamp down on such trades too, since midnight 6 September 2021. 

Meanwhile in the black market, the dollar was being traded at Rs 250 a unit, sources told this reporter recently (5 December 2021), a year-on-year depreciation of  Rs 58 (30.21 per cent). A weak ER causes cost push inflationary pressure as Sri Lanka is an import dependent economy.

A year ago, in the interbank FX market, due to “milder” controls, the market ER which was from one week to one month forwards was trading in a superimposed fashion of Rs 191/192 to the dollar in two-way quotes.

”Spot” trades are settled after two market days from the date of transaction, CBSL, the steward of GoSL debt and its foreign reserves deals in “spot.” 

 FVMP debt is equivalent to the FV of CBSL’s holdings of T Bills and T Bonds to maturity.  CBSL has the sole and mandatory rights to print money.


By Paneetha Ameresekere | Published: 2:10 AM Jan 11 2022

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