Share market proves susceptible to IMF observations on rate cut risks

By Hiran H. Senewiratne

The stock market was susceptible to the IMF report yesterday that revealed Sri Lanka’s last rate cut has raised inflation risks and that there is limited room for further ‘loosening’ in the short-term. An additional policy rate cut of 100 bps in November to 10 percent has raised inflation risks, market analysts said.

The monetary policy stance needs to be carefully calibrated to strike the right balance between maintaining a credible inflation path close to the target and supporting economic stabilization.The All Share Price Index went down by 29.68 points while S and P SL20 declined by 14.98 points.

Turnover stood at Rs 674 million with three crossings. Those crossings were reported in Windforce, which crossed 8.6 million shares to the tune of Rs 165 million; its shares traded at Rs 19.20, Agarapathana 15 million shares for Rs 112.6 million; its shares traded at Rs 7.50 and Keells Hotels 1 million shares crossed for Rs 20.2 million; its shares traded at Rs 19.30.

In the retail market top seven companies that mainly contributed to the turnover were; JKH Rs 32.7 million (170,000 shares traded), Chevron Lubricants Rs 24.4 million (265,000 shares traded), Lanka Milk Food Rs 23.8 million (102,000 shares traded), Hayleys Fabrics Rs 22.1 million (545,000 shares traded), Pan Asian Bank Rs 16.9 million (851,000 shares traded), Melstacope Rs 15.8 million (177,000 shares traded) and Expolanka Holdings Rs 14.5 million (101,000 shares traded). During the day 39.4 million share volumes changed hands in 6000 transactions.

Further, Cargills Bank’s Initial Public Offering (IPO) had been oversubscribed yesterday. Under the IPO 62.5 million shares were issued for a share value of Rs 8; out of which Rs 500 million was raised in compliance with Central Bank certain regulations.

It is said high net worth and institutional investor participation was noted in Melstacorp, HNB and JKH. Mixed interest was observed in Expolanka Holdings, Sampath Bank and Commercial Bank, while retail interest was noted in Industrial Asphalts, SMB Leasing and Browns Investments.

The Food, Beverage & Tobacco sector was one of the top contributors to the market turnover (due to Melstacorp). The Banking sector was one of the highest contributors to the market turnover.

Yesterday, the rupees opened at 326.50/90 to the US dollar, from 326.70/80 the previous day, dealers said. Bond yields were down. A bond maturing on 01.08.2026 was quoted at 13.80/95 percent from 13.80/95 percent. A bond maturing on 15.01.2027 was quoted at 13.85/95 percent from 13.80/13.95 percent. A bond maturing on 01.07.2028 was steady at 14.05/15 percent.