Sri Lanka shares fell on Thursday dropping to their fresh lowest in three-and-a-half months dragged down by index heavyweights as investors awaited direction on local debt restructuring and IMF, brokers said.
“Investor sentiment dented as they waited for direction on local debt restructuring and the IMF deal,” an analyst said.
However, early today, State Minister for Finance Shehan Semasinghe said there was no decision taken on local debt restructuring.
However, there is speculation that a second nominal default and re-structure will be imposed on rupee debt holders, which has kept interest rates elevated.
The main All Share Price Index (ASPI) closed 0.65 percent or 52.26 points lower at 8,034.74, its lowest since August 2.
Analysts said, even though the overall budget will not have a direct impact on the market, certain policies such as fuel surcharge tax can affect the power and energy sectors and overall manufacturing sector.
President Ranil Wickremesinghe announced a surcharge tax at the point of importation, on diesel, petrol and crude oil to pay some loans of the state-run fuel retailer.
The budget saw policies that will increase the cost of doing businesses across the board, but relieving the government from depending on excess money printing, analysts say.
The market witnessed a turnover of 976 million rupees, less than a third of this year’s daily average turnover of 3.1 billion rupees.
The market saw a foreign inflow of 56 million rupees. The market has seen a total net foreign inflow of 18.1 billion rupees so far for this year.
Analysts said, a bearish sentiment can be expected in the banking and financial sector until a clear direction is given by the government on local debt restructuring.
The market has been on a falling trend as investors awaited for cues on policies from the 2023 budget.
Investors are also concerned over the impact of local debt restructuring on risky assets, analysts have said, as the market is waiting for a debt restructuring decision between the government and its creditors ahead of an IMF loan approval.
The more liquid index S&P SL20 closed 0.16 percent or 4.03 points lower at 2,460.17.
The ASPI has fallen 6.5 percent so far in November after losing 13.4 percent in October. It has lost 34.2 percent year-to-date after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.
Ceylinco Insurance, dragging the market down, fell 6.9 percent to close at 1,954 rupees a share.
The market heavyweight LOLC fell 2.7 percent to close at 338 rupees’ while John Keells Holdings closed down 1.1 percent at 139 rupees.
The listed companies have shown reasonable profits in their third quarter of the year, however, analysts say the disposable income of the general public due to proposed tax hikes is the main reason for the negative expectations over the December earnings.
