Tuesday Markets: Shareholder wealth loss tops Rs 72B

By Paneetha Ameresekere | Published: 2:00 AM Sep 22 2021

By Paneetha Ameresekere

The bourse extended losses in shareholder wealth to 71.66 billion in the three consecutive market days to yesterday due to sustained uncertainty. Complementing these developments, the bourse fell for the third consecutive market day to yesterday, with the benchmark ASPI declining by 0.36 per cent to 8,770.39 points and the more sensitive S&P SL 20 Index by 0.76 per cent to 3,266.79 points, yesterday over Friday on a Rs 1.71 billion turnover and on a share volume of 106.65 million. 

Monday was a Poya holiday for markets. Bourse suffered net foreign outflows (NFOs) for the second consecutive market day to yesterday with a figure of Rs 1.07 million, increasing NFOs to Rs 43.07 billion in the calendar year to yesterday, a year on year (YoY) increase of Rs 6.08 billion (16.45 per cent). In the 171 market days that have transpired in the calendar year to yesterday, the bourse has suffered NFOs in 149 (87.13 per cent) of those days due to nagging uncertainty. Last year the bourse suffered a record Rs 51.04 billion worth of NFOs. In the 207 market days that transpired last year, the bourse suffered a record NFOs in 90.82 per cent (188) of those days. 

Money Market Short 11th Day 

Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt decreased by 0.27 per cent (Rs 4,320 million) to Rs 1,602,826.46 million (Rs 1.6028 trillion), therewith marginally defraying inflationary pressure yesterday. GoSL’s FVMP debt has been over Rs one trillion for a record 43 consecutive market days to yesterday due to a lack of revenue. 

Money market was short for the eleventh consecutive market day to yesterday thereby causing rate pressure, though market shortfall fell by 2.78 per cent (Rs 5,745 million) to Rs 200,850 million (Rs 200.85 billion). Liquidity increased by Rs 5,745 million (US$ 28.73 million) during trading due to the settlement/s of Central Bank of Sri Lanka’s (CBSL’s) swaps with the market and/or GoSL’s US dollar sales to CBSL. Conversions are based on Thursday’s administered value of the benchmark ‘spot’ which was Rs 200 to the dollar. CBSL lacks transparency in its open market operations. 

Dead: 98 Days

 The interbank foreign exchange (FX) market was ‘dead’ for the 98th consecutive market day to yesterday 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 200-203 to the dollar, thereby aiding in the spawning of a black market. Even 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 9.40 per cent (Rs 17.45), thereby causing cost-push inflation as Sri Lanka is an import dependent economy. 

Led by panic buying of riskless, low returns Treasury (T) Bills and T Bonds in secondary market trading due to sustained uncertainty, rather than lend to the high returns private sector, the engine of growth, saw GoSL’s at least theoretical money printing borrowing costs fall for the third consecutive market day to yesterday, this time too, steeply, by 2.29 per cent (Rs 918.76 million) to Rs 39,189.57 million. 

As at 31 December 2020, in the interbank FX market, beginning with ‘cash’ and going up to “one week’s forwards, the ER was trading at a seemingly inflated value of Rs 187.50/188.50 to the dollar in two way quotes due to CBSL controls, while a year ago due to lesser controls, the benchmark ‘spot’ was trading in the market at Rs 185.45/55 to the dollar in two way quotes. 

‘Spot’ trades are settled after two market days from the date of trading. Having a dead interbank FX market, supported by FX controls lead to an era of shortages, queues, nepotism, cronyism, corruption and rationing, reminiscent of the era the country experienced 44 years ago over a seven year period from 1970-77, where the then Government in power practiced a closed economy. MP is equivalent to the face value holdings of T Bills and T Bonds by CBSL. CBSL is the only mandated authority to print money

By Paneetha Ameresekere | Published: 2:00 AM Sep 22 2021

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