High net worth foray into Colombo stocks
The Central Bank’s rate cut prompting reducing deposit rates and high net worth individuals resuming activity at the stock market have seen the Colombo Stock Exchange recovering.
The deposit rates that were over 20 per cent have come down to as much as 11 per cent after the regulator cut both SLFR (Standing Lending Facility Rate) and SDFR (Standing Deposit Facility Rate) to 13 per cent and 14 per cent, respectively, from 15.5 per cent and 16.5 per cent noting that lower interest rates are essential to restarting credit flows into the real economy, which has been contracting since June last year. Analysts say that the reducing lending rates will reflect in the corporate earnings from the next quarter.
Stockbrokers said that high net worth investors such as Raynor Silva, Dr. T. Senthiverl, and Rusi Captain have all been active in the market during the past week.
Stock market analysts said that the ‘marginal’ clarity on the fate of the banks in the event of domestic debt restructuring (DDR) where certain ministers have said that the banking sector will not reflect on DDR, has prompted many traders to put money in these counters.
Last week also saw
Sri Lanka Insurance Corporation shedding some of its portfolios where a large conglomerate is said to be the buyer. “This is because the Insurance Corporation has stakes in two major private banks, which is very attractive,” an analyst said.
The Central Bank (CB) expects interest rates to return to single digit levels as early as July and the prices to be maintained at the desired mid-single-digit levels thereafter.
Stockbrokers also said that the selling witnessed in the past few weeks was due to margin trading. “It was not intentional selling by traders,” a stockbroker said. He added the CB is expected to announce one year inflation rate by next month, which will possibly be less than 20 per cent and will further see investors coming into the market.
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