Negative investor sentiment triggers circuit breaker at CSE but turnover remains healthy

By Hiran H. Senewiratne

The CSE suffered a temporary setback yesterday with the halting of trading around 1.45 pm as an index of liquid stocks plunged below 5 per cent in intra-day trading because of panic selling of mainly index weighted blue-chip counters.

The S&P SL 20 index fell 5.01 per cent, after earlier recovering from a 4.8 per cent fall but recorded a healthy turnover level, which was above the annual average level of Rs 3.5 billion. The broader All Share Index was down 4.45-pct. The circuit breaker occurred in the stock market due to negative sentiments on the macroeconomic front, especially stemming from power cuts and the foreign exchange crisis, stock market analysts said.

Stocks have been driven by loose monetary policy both at home and abroad. Some stocks have been bought as an inflation hedge with the rupee expected to fall. Others have also benefited from import controls. Sri Lanka’s loose monetary policy however has led to increasing external weaknesses which have translated into disrupted supplies, market watchers said.

The All- Share Price Index went down by 542 points and S and P SL20 declined by 203.9 points. Turnover stood at Rs 4.2 billion without a single crossing.

In the retail market top seven companies that mainly contributed to the turnover were; Expolanka Holdings Rs one billion (4.3 million shares traded), Browns Investments Rs 350 million (26.2 million shares traded), Commercial Leasing and Finance Rs 314 million (four million shares traded), LOLC Finance Rs 268 million (11.4 million shares traded),LOLC Holdings Rs 137 million (132,000 shares traded), Dialog Rs 132 million (11.5 million shares traded) and Softlogic Life Insurance Rs 129 million (one million shares traded). During the day 221 million share volumes changed hands in 45000 transactions.

Separately, Nestle Lanka, Hatton National Bank and Hatton National Bank non-voting announced their interim dividends and scrip dividend of Rs 20, Rs 6.50 cash and Rs.2.50 scrip, for voting and non -voting, while HNB Assurance announced a first and final dividend of Rs 3.20 per share. Nestle Lanka announced a final dividend of Rs 35 per share.

Yesterday, the US dollar rate was quoted at Rs 202.66, which was the controlled price of the Central Bank. If the Central Bank allowed a free float of the rupee, it would touch Rs 250, market analysts said.