Thursday, November 19, 2009

Sri Lanka shares down; poll concerns override rate cut

By Shihar Aneez - Sri Lanka's shares fell on Wednesday, as investors sold shares across the board due to pre-poll uncertainty despite the central bank cut key policy rates to multi-year lows early in the day.

The All-Share Price Index .CSE of the Colombo Stock Exchange closed 0.41 percent or 12.35 points weaker at 2970.90.

"Investors are concerned on the political front as election dates have not yet been announced," Hussain Gani, associate director at Asia Securities, told Reuters.

Sri Lankan president Mahinda Rajapaksa on Sunday dodged an expected announcement of dates for early presidential and parliamentary elections due by April without giving a reason. [ID:nCOL305387]

Sri Lanka's central bank on Wednesday cut its key policy rates for the sixth time this year to multi-year lows aiming to encourage private-sector borrowing and spur faltering economic growth. [ID:nCOL91110]

The benchmark 91-day treasury bill yield fell 48 basis points to an over five-year low of 7.25 percent at a weekly auction after the rate cut. [ID:nCOL387141]

"The rate cut was not taken by the market due to prevailing political situation," Gani said.

Investor confidence in the island nation's bourse, still one of this year's best-performers in the world with a 97.7 percent year-to-date return, has been on the decline after the government on Oct. 13 announced it will hold elections by April.

It has fallen over 5.1 percent since then.

Shares in Sri Lanka's private lender, Hatton National Bank HNB.CM closed 0.88 percent weaker at 168 rupees.

Turnover was 844.5 million rupees ($7.4 million), more than last year's daily average of 464 million rupees.

Analysts say investors are still wary of a likely loss of a European Union trade concession over a rights abuse probe, protests and trade actions and the arrest of one of Sri Lanka's main investors in a U.S. insider trading case in mid-October.


Sri Lanka rupee LKR= closed flat at 114.25/30 a dollar. It hit a fresh seven month high of 114.25/30 a dollar on Tuesday, from Monday's close of 114.35/40 as the central bank allowed a controlled rise in the currency. [ID:nCOL63988]

Sri Lanka's 2009 revenue is expected to decline by 13.5 percent or 115 billion rupees ($1 billion) due to the impact of global financial crisis, deputy finance minister Ranjith Siyambalapitiya said on Tuesday. [ID:nLH601202]

The interbank lending rate or call money rate CLIBOR edged down to 8.641 percent from Tuesday's 9.197 percent.

© Reuters India

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