Sri Lanka shares hit 2-month low as economy gradually comes to standstill
ECONOMYNEXT – Sri Lanka stocks ended at a two-month closing low on Tuesday (28), slipping for the second session as the country’s fuel shortage which has led to a gradual standstill weighed on the market sentiments, brokers said.
The main All Share Price Index (ASPI) closed 1.87% or 139.25 points lower at 7,312.66, its lowest close since April 27.
“This is how the market will be for the next 10 days until we have some confirmation on the fuel supply,” a top market analyst said.
“However, if there’s news about an IMF staff-level agreement tomorrow, we may see some positive in the market.”
Government on Monday has declared that it can only provide fuel for essential services including health and all non-essential services to work online as the country has run out of fuel, while Power and Energy Minister on Sunday asked the public to use fuel sparingly as there was no fuel shipment scheduled to arrive into Colombo in the foreseeable future.
The Minister said that Sri Lanka’s oil suppliers are wary to supply after the recent downgrades.
Traditional suppliers to state-run fuel retailer Ceylon Petroleum Corporation could no longer bear the risk of supplying Sri Lanka due to unsettled arrears, he said.
The country also has issues in opening letter of credit and some of the new suppliers are asking for pre-payments.
The turnover was 815 million rupees, less than a quarter of of this year’s daily average turnover of 3.47 billion rupees.
A 10-member IMF team arrived in Sri Lanka and began discussions on policy corrections with Prime Minister Ranil Wickremesinghe on June 20 and the talks have been seen as positive for the investor sentiment. However, Sri Lanka must show progress on debt restructuring before IMF lends any money.
Market analysts have said investors were heavily feeling the pinch of economic crisis as the country’s fuel bunkers have dried out the island nation was frantically looking for dollars to purchase fuel.
The public sector and the schools have moved online for two weeks on the government’s advice to reduce transport and save fuel.
Though a new prime minister and a new cabinet have been appointed, analysts see little progress on both the economical and political fronts. The country is struggling to ensure a continuous supply of fuel due to a shortage of US dollars.
The more liquid S&P SL20 index plunged 1.88% or 44.65 points to 2,336.44.
The market has so far lost 9.7% in June after gaining 6% in May. It lost 23% in April followed by a 14.5% fall in March.
The market has lost 40% so far this year after being one of the world’s best stock markets with an 80% return last year when large volumes of money were printed.
Sri Lanka’s sovereign debt default has already led the country to be rated with restricted/selective default rating by rating agencies, which has weighed on investor sentiment.
Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.
Expolanka Holdings led the fall, slipping 4.2% to 169.75 rupees a share.
Sampath Bank fell down 3.5% to 30 rupees a share, while Aitken Spence eased 6.4% to 79.2 rupees a share. (Colombo/June 28/2022)
