Wednesday Markets: Rs 80.84 Bn Shareholder Wealth Lost
By Paneetha Ameresekere
The bourse saw the benchmark ASPI declining for the third consecutive market day to yesterday, this time steeply by 1.48 per cent to 9,497.49 points and the more sensitive S&P SL 20 Index by 1.75 per cent to 3,506.91 points, on a Rs 3.39 billion turnover and on a share volume of 146.83 million due to nagging uncertainty.
Shareholder wealth lost in the three market days to yesterday have amounted to Rs 80.84 billion. The bourse saw a pyrrhic net foreign inflow of Rs 18.49 million yesterday, though having had suffered NFOs amounting to Rs 45.21 billion in the calendar year to date, a year on year (YoY) increase of Rs 5.47 per cent ( Rs 2.34 billion).
In the 187 market days that have transpired in the calendar year to yesterday, the bourse has suffered NFOs in 163 (87.17 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.
FVMP Rs 1.67 Tn
Government of Sri Lanka’s (GoSL’s) non demand pull inflationary face value money printing (FVMP) debt increased by Rs 12,908 million, thereby increasing GoSL’s FVMP debt as a whole by 0.78 per cent to Rs 1,670,224.32 million (Rs 1.6702 trillion) yesterday. GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 59 market days to yesterday due to a lack of revenue.
GoSL’s at least theoretical MP borrowing costs (BCs) fell by 0.26 per cent (Rs 145.64 million) to Rs 55,926.08 million yesterday due to market preference to invest in low value, riskless Treasury T-Bills and T-Bonds in secondary market trading rather than lend to the lucrative private sector, the engine of growth, due to uncertainty.
Money market was short for the twenty seventh consecutive market day to yesterday thereby causing persistent rate pressure, with market shortfall increasing by 2.04 per cent (Rs 2,419 million) to Rs 121,083 million yesterday.
Liquidity steeply decreased by Rs 15,327 million (US$ 75.73 million) during yesterday’s trading due to the settlement/s of GoSL’s foreign debt servicing commitments and/or CBSL’s swaps with the market and/or Central Bank of Sri Lanka’s (CBSL’s) US dollar sales/swaps to/ with GoSL. Conversions are based on Monday’s administered value of the benchmark ‘spot’ which was Rs 202.40 to the US dollar. CBSL is not transparent in its open market operations data.
Dead 114 Days
The interbank foreign exchange (FX) market was ‘dead’ for 114th 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 yesterday and year on year (YoY) by 10.06 per cent (Rs 18.55) to the dollar, thereby causing cost-push inflation as Sri Lanka is an import dependent economy. 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 184.40/45 to the dollar in two way quotes.
Meanwhile Sri Lanka’s 2021 economic growth projection has been downgraded to 3.6 % by the International Monetary Fund in its latest economic outlook from an earlier 4.0 percent, while global growth has also been lowered slightly. World output has been lowered to 5.9 % from 6.0 % in a July projection.