Sri Lanka’s shares edge down on profit taking on renewed interest in the financial sector

ECONOMYNEXT – Sri Lanka’s shares edged down on Monday on selling pressure and profit taking as the banking sector sees renewed interest debt optimization assurances were prompted to investors by the Banking Association, an analyst said.

The main All Share Price Index (ASPI) was down 0.13 percent or 11.84 points to 8,914.74, while the most liquid index, S&P SL20, was up 0.54 percent or 13.96 points to 2,607.40.

“There was mixed sentiments, due to the slight recovery in the biggest sector,” an analyst said.

Sri Lanka’s banks said assurances has been received that the stability of the sector cannot be risked in a planned domestic debt overhaul, to make the defaulted debt sustainable under a program with the International Monetary Fund.

Analysts say that the market is adopting a wait and see approach as the assurances provided on debt optimization were given by an Association rather than from a legitimate entity.

“Until firm assurances are granted we may see slow trading activity,” an analyst said.

“Central Bank of Sri Lanka (CBSL) has assured the banks that the regulatory stance in the on-going Domestic Debt Optimization (DDO) discussions with the diverse stakeholders will be that, the banking sector stability cannot be put at risk,” Sri Lanka Bank’s Association said in a statement.

“The trend should pick up in the days to come,” an analyst said.

Sri Lanka is confident of meeting its debt restructuring objectives and no longer intends to borrow for infrastructure projects that don’t promise returns, Foreign Minister Ali Sabry said, adding that the country has learnt its lesson.

“We have made a lot of progress. Prior actions except some minor ones were taken before the extended fund facility (EFF) was approved.  We have introduced cost-reflective pricing in many areas. State-owned enterprise (SOE) reforms are on the cards. Tax reforms have come into play. There is a sense of stability in the country. We have eliminated all sorts of queues and shortages,” he said.

Top gainers were Sampath Bank, Commercial Bank and Expolanka.

The market generated a revenue of 667 million rupees, below the daily average of 1.4 billion rupees. Majority of the turnover was made from the banking sector bringing in 185 million rupees, the transport sector brought in 120 million rupees and the food and beverage accumulated 103 million rupees during trade.

The minister was emphatic that any debt restructuring effort should feature equal treatment for all of Sri Lanka’s creditors. Whether it’s debt relief or some other form of restructuring, the same standard must apply universally, he said. Thus far that is the latest insight on debt restructuring provided from the government’s end.

Sri Lanka’s banks have sought clarity on a proposed domestic debt restructure, questioning whether there is a non-voluntary element in the plan, and have also called for transparent discussions with all banks.

Sri Lanka’s Central Bank and Treasury officials have said that there will be voluntary debt ‘optimization’ for domestic debt holders.

Top losers were Hatton National Bank, Vallibel One and Chevron Lubricants, on selling pressure and profit taking.

The market also generated a foreign inflow of 39 million rupees, having an outflow of 10 million rupees bringing the net foreign inflow to 1.6 billion rupees.  (Colombo/May09/2023)