Surge and slump in bourse following decision to float the rupee to 230 against the dollar

By Hiran H.Senewiratne

CSE trading activities surged over 1.50 per cent minutes after the market opened yesterday following the Central Bank’s move to float the rupee to 230 against the US dollar. The stock market started on a positive note but subsequently declined because investors grew anxious over the possibility of CBSL move affecting the cost of production in the manufacturing sector, market analysts said.

On the other hand, certain companies that earned in dollars would likely benefit despite an additional burden on the economy. At present, Sri Lanka is grappling with a foreign reserve shortage. Besides, the increase of Brent crude oil prices rising to US $ 125 per barrel could negatively impact the country’s economy, stock analysts said on surveying current realities.

The CBSL came under severe pressure to free-up the cap on the exchange rate as the black market is thriving with the dollar being traded at between Rs. 240 to Rs. 260. For workers remittances channeled through the banking sector, the dollar fetched Rs. 210 as an incentive. Some economists said that the Central Bank’s move to float the rupee against the US dollar is an indication that the government is planning to implement the IMF recommendations from next month.

Amid those developments both indices moved downwards. The All- Share Price Index went down by 437.46 points to end at 10523.03 and S and P SL20 declined by 120.896 points to end at 3593.39. Turnover stood at Rs 3.4 billion with a single crossing. The crossing took place in Hemas Holdings, which crossed one million shares to the tune of Rs 59.8 million and its shares were traded at Rs 59.50.

In the retail market top seven companies that mainly contributed to the turnover were; Expolanka Holdings Rs 601 million (2.2 million shares traded), Browns Investments Rs 514 million (48.2 million shares traded), LOLC Holdings Rs 251 million (282,000 shares traded), LOLC Finance Rs 191 million (10.6 million shares traded), Royal Ceramic Rs 161 million (three million shares traded), Commercial Leasing and Finance Rs 142 million (3.9 million shares traded) and Melstacorp Rs 99.5 million (two million shares traded). During the day 305 million share volumes changed hands in 38000 transactions.

Media reports about the United States and its allies considering a possible ban on Russian oil imports added more pressure in the global oil market, pushing Brent up to US $ 139.13 and WTI to US $ 130.50, their highest levels since 2008. This resulted in investor sentiment for front-line stocks in the market turning downbeat during yesterday’s session.

It is said high net worth and institutional investor participation was noted in Access Engineering, John Keells Holdings and Renuka Holdings. Separately, United Motors Lanka announced an interim dividend of Rs. 1.50 per share.