Stock market dip aggravates

• Rs. 33 b in value wiped off, bringing total since 2012 Budget to Rs. 64 b
• ASI crashes below 6,000 points-level, year-to-date negative return tops 11%
• Debutant People’s Leasing survives volatile day

Causing more misery to investors the Colombo stock market’s decline aggravated yesterday as the benchmark index crashed below the 6,000 point level in its sharpest plunge since the presentation of Budget 2012 by President Mahinda Rajapaksa on Monday.

The bourse saw Rs. 33 billion in value wiped off, increasing the amount to Rs. 64 billion for the week so far. The near 3% dip by the All Share Index brought it to 5,866 points, a level lowest in 14 months. Turnover however was a redeeming Rs. 1.6 billion, nearly triple from the previous day. Analysts blamed the worsening situation in the bourse to panic selling and loss of confidence owing to some negative developments in the 2012 Budget and outside.
NDB Stockbrokers said the ASPI and the MPI sank possibly due to forced selling arising as a result of margin calls. “Prices of more liquid fundamentally strong counters were seen falling as speculative counters remained illiquid with negligible buying at current levels. While panic has set in, the speculative counters may have to reduce further for a sustainable bull run to commence,” it added.
DNH Financial said: “The bourse plunged below the key psychological support level of 6,000 with nervous investors exiting positions in what appeared to be a panic wave of selling.”
Reuters said investors dumped shares after this week’s currency devaluation and foreign investors sold their positions, amid a tightening credit crunch and margin calls.
“In the face of rupee devaluation, it has further eroded investor confidence and investors sold shares on margin calls,” said a stockbroker, asking not to be named.
The plantation sector index fell 4.68 per cent on Thursday in reaction to a Budget proposal to redistribute 37,000 acres of unused State planting land to small farmers.
Market heavyweight John Keells Holdings PLC, which accounted for 36.3 per cent of the day’s turnover, ended flat at Rs. 175, while shares in Colombo Land and Development PLC closed 12.2 per cent weaker at Rs. 45.30.
People’s Leasing Company Ltd., the country’s largest Initial Public Offering in more than six years, began trading on Thursday and closed flat at its offer price of Rs. 18.
The day’s turnover of Rs. 1.62 billion was highest since 18 November, but well below last year’s average of 2.4 billion and this year’s 2.4 billion. Average turnover in the last 10 sessions has been Rs. 923 million.
Total volume was 87.4 million shares, against a five-day average of 56.7 million. The 30-day and 90-day average trading volumes were 55 million and 101.1 million. Last year’s daily average was 67.9 million.
The bourse has fallen 13.5 per cent since 1 October and slipped to Asia’s 11th-best performer with a year-to-date loss of 11.6 per cent.
The bourse saw a net foreign outflow of Rs. 64.4 million on Thursday, and thus far in 2011, offshore investors have sold 17.4 billion, and a record 26.4 billion in 2010.
Losers outnumbered gainers by 208 to 19 on Thursday, Thomson Reuters data showed.
The rupee closed flat at 113.89/90 rupees a dollar from Wednesday’s close in light trade, dealers said.
On Wednesday the Central Bank re-imposed the trading band of 113.50/90 and the Governor told Reuters the rupee would not be allowed to depreciate any further.
Two currency dealers Reuters spoke to said the Central Bank had sold at least $ 100 million in the last two sessions to defend the currency at the new level amid depreciation pressure.
But on Thursday the bank pumped in only around $ 6 million.