CSE struggles amidst low turnover, net foreign outflow
View(s):The Colombo Stock Exchange (CSE) on Monday recorded its lowest turnover in over four years amidst a three week foreign outflow with investor sentiment at its lowest ebb.
“It’s the lowest turnover at Rs. 101 million since the last crash in December 2012,” an analyst noted to the Business Times. On Tuesday the turnover recovered to Rs. 315 million – still not as high.
The low turnover is mainly owing to many reasons – mostly policy decisions, analysts say.
There’s acute political uncertainty in the country that has hampered sentiment all around. Then Parliament being prorogued (which is not an unusual protocol but post the no confidence motion the media had highlighted it in a negative light, according to some analysts) was the last of many blows to investor sentiment.
Also the IMF reform agenda that was to be approved by the Cabinet by March 31 hadn’t happened and their implementation by June 30 won’t see the light of day.
Another analyst added that the fuel pricing formula needs to come as the market has already factored in and forecasted fuel to increase in price. “It has to increase by at least Rs. 10,” he added.
The only silver lining seems to be the Rs. 2.5 billion sovereign bond which is already boosting a bit of sentiment at the CSE. “Already we’re seeing some positivity and it’s a good sign,” the first analyst said.
The Central Bank’s (CB) estimate that Gross Domestic Product (GDP) growth is likely to increase over the next few quarters to reach 5 per cent – 5.75 per cent for 2018.
Analysts say that CB also expects inflation to decelerate in the year ahead, to 4 per cent – 6 per cent as food supplies stabilise. Another spell of adverse climatic conditions in 2018 and a sharper than expected depreciation of the Rupee could however, reverse this trend and exert pressure on inflation again, they say. The second analyst said by Tuesday there was net foreign buying for April so far at Rs. 1.2 billion.