Two CSE circuit breakers as fears grow over shrinking foreign reserves

By Hiran H.Senewiratne

CSE trading activities yesterday experienced two major circuit breakers. Consequently, the most liquid index plunged below 8 per cent. According to stock brokers, the market halted at 11.17 am when the S&P SL20 index fell over 5 per cent and again at 12.13 pm when the same index fell more than 7.5 per cent.

Due to this scenario a fresh buying interest was propped up but due to its steep fall, the stock market was unable to recover its momentum. The government’s decision to pay off the US $ 34 million fuel bill from the Treasury to a Singapore company created volatility in the stock market. This is because investors became concerned about a further deterioration of foreign reserves, which would result in the printing of rupees. This created inflationary pressure for the economy, market analysts said.

The broader index fell to the intraday lowest at 10,811.27 points, losing 6.74 per cent or 781.03 points. However, the market picked up slightly following this plunge to settle at 11,179.04 points at 2.30 pm, provisional data showed. S&P SL20 of the most liquid stocks was more than 4 per cent or 169 points to 3,756.68 points and the All- Share Price Index plunged to 800 points but later settled down to 400.4 points.

Turnover stood at Rs 4.52 billion with two crossings. Those crossings were reported in Lion Brewery, which crossed 80000 shares to the tune of Rs 42,8 million and its shares traded at Rs 535 and Hemas Holdings 380,000 shares crossed to the tune of Rs 23.75 million, its shares traded at Rs 62.50.

In the retail market top seven companies that mainly contributed to the turnover were; Expolanka Holdings Rs 1.17 billion (4.5 million shares traded), Browns Investments Rs 614 million (53 million shares traded), LOLC Holdings Rs 228 million (256,000 shares traded), Royal Ceramic Rs 201 million (3.5 million shares traded), LOLC Finance Rs 170 million (8.4 million shares traded), Hayleys Rs 150 million (1.5 million shares traded) and Commercial Leasing and Finance Rs 139 million (3.5 million shares traded).

Market analysts had been predicting a nosedive as margin calls kicked in and the economic crisis in the country worsened as extended power-cuts took hold amid a fuel shortage and a dollar crisis. Analysts said this eroded investor confidence in the market. Stockbrokers said LOLC and Expolanka accounted for nearly 50 per cent of the market plunge. Expolanka, LOLC Holdings, and Browns Investments were the forerunners of the plunge.

Expolanka Holdings, the market heavyweight, slipped 8.90 per cent to close at Rs 261.00 a share, while LOLC Holdings went down 8.93 per cent to close at Rs 909.75 a share. Browns Investment fell 13.08 per cent to close at Rs 11.30 a share.

Yesterday the US dollar was quoted at Rs 202.65, which was the Central Bank controlled exchange rate. The actual floating exchange rate of the US dollar would be more than Rs 250. With this rate, the dollar would touch more than Rs 300 towards the end of the year, informed sources said.