Sri Lanka’s shares weigh down on selling pressures, high interest and fears of DDR

ECONOMYNEXT –  Sri Lanka’s shares closed down on Monday on thin trade as speculations over possible domestic debt restructuring and high interest rates resulted in selling pressure which weighed on the investor sentiment, an analyst said.

The main All Share Price Index was down 1.21 percent or 105.58 points to 8,611.38 while the most liquid index S&P SL20 was down 1.78 percent or 44.09 points to 2,434.31.

“The market is seeing more selling pressures as as investors are taking a stance until more clarity is given on domestic debt restructuring assurances and interest rates are high,” an analyst said.

Sri Lanka is making progress in an International Monetary Fund agreement but improvements have to be made, State Minister for Finance Shehan Semasinghe said.

Sri Lanka’s government is to disclose the stance on domestic debt restructuring towards the end of May, which is why investors have adopted a wait and see approach.

The market generated a turnover of 599 million rupees, below the market’s yearly average of 1.3 billion rupees.

Top losers during trade were Commercial Bank, Vallibel One and Lanka IOC.

“There is nothing happening in the market, investors are clearly on a wait and see approach and selling out cause of interest rates becoming unbearable, margin rates are 36 percent and investors don’t want to gatekeep shares for the long run cause of the rate of interest,” an analyst said.

Analysts said the low volumes seen in the market are due to the debt restructuring concerns, and investors are waiting for the monetary policy review for the next month.

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.

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.