Global business developments dampen local bourse

By Hiran H.Senewiratne

CSE trading activities witnessed some dull and negative moments due to the global business scenario yesterday. The main reason being that the Chinese real estate giant Evergrande is facing a financial crisis triggered by the current Covid-19 situation. The company is now facing a major crisis with regard to settling their debt, which factor has negatively impacted major stock markets in the world, market analysts said.

Evergrande expanded aggressively to become one of China’s biggest companies by borrowing more than $300bn (£217bn).Last year, Beijing brought in new rules to control the amount owed by big real estate developers, sources said.

The new measures led Evergrande to offer its properties at major discounts to ensure money was coming in to keep the business afloat. Now, it is struggling to meet the interest payments on its debts. This uncertainty has seen Evergrande’s share price tumble by around 85 per cent this year. Its bonds have also been downgraded by global credit rating agencies.

Due to these developments it is believed that investor confidence in the CSE is also affected. However, Sri Lanka and seven other countries have been taken off the ‘Red List’ of the United Kingdom’s travel advisory, boosting the country’s prospects for tourism. Therefore, the local hotel sector witnessed fresh buying interest, market sources said.

The pandemic restrictions on travelling into England and Scotland were to be eased, officials were cited as saying on Friday, replacing a complicated ‘traffic light’ watch list with a simpler regime for fully vaccinated arrivals. Amid those developments both CSE indices witnessed a downward trend. All Share Price Index went down by 34.08 points and the S and P SL20 declined by 23.32 points. Turnover stood at Rs. 1.7 billion with one crossing. The crossing took place in Sampath Bank, which crossed three million shares to the tune of Rs. 149.1 million, its shares traded at Rs. 149.70.

In the retail market top five companies that mainly contributed to the turnover were; Expolanka Rs. 295 million (1.8 million shares traded), Browns Investments Rs. 287 million (31.7 million shares traded), Hayleys Rs. 83.9 million (856,000 shares traded), Citrus Leisure Rs. 72.4 million (8.1 million shares traded) and Keells Hotel Rs. 70.76 million (4.8 million shares traded). During the day 106.6 million share volumes changed hands in 19000 transactions.

The Commercial Bank’s latest listed debenture issue had drawn 120 applications with a demand for Rs. 8.6 billion. The bank issued 50 million Basel III compliant Tier 2, listed, rated, unsecured, subordinated, redeemable debentures with a non-viability conversion feature at Rs. 100 each with an option to offer a further 50 million debentures in the event of an oversubscription. The debentures were of two types – Type A, a five-year instrument with a fixed coupon rate of 9 percent per annum (Annual Effective Rate of 9.2 percent) payable semi-annually; and Type B, a six-year instrument with fixed coupon rate of 9.50 percent per annum (AER of 9.73%) payable semi-annually.

Meanwhile, the US dollar is now selling at Sri Lanka Rs. 199.405, Central Bank sources revealed.