Sri Lankan shares recovered from a more-than-one-week low on Thursday led by a surge in local buying on hopes the country could reduce its budget deficit from an eight-year high after IMF delayed a loan on fiscal concerns.
The All-Share Price Index .CSE of the Colombo Stock Exchange closed 0.84 percent or 31.82 points up at 3805.85. It hit a record high of 3847.18 points on Tuesday.
"Local retail and institutional investors are confident that the government can tackle the deficit problem in the next budget after the April election," said Jaliya Wijeratne, director of institutional sales at SMB Securities.
"Foreigners are leaving and will be in a 'wait and see' mood after the IMF delay and deficit concerns ahead of the polls." Sri Lanka will hold legislative elections on April 8, after a presidential poll on Jan. 26.
On Tuesday, Sri Lanka's finance ministry said the 2009 budget deficit had hit an eight-year high of 9.7 percent of GDP, well over the 7 percent target set by the International Monetary Fund for a $2.6 billion loan. The ministry also said the country will miss the 2010 IMF deficit target as well.
The IMF last week said it would delay a third tranche of the loan until it sees the budget after the April 8 parliamentary polls.
Sri Lanka will initiate tax and investment reforms in its next budget following the election, a government official said on Thursday.
Analysts said local investors were looking to buy in high quantities after prices fell on Wednesday, but foreign investors continued their exit strategy, and would watch out for factors like further erosion in fiscal management, rating downgrades, political instability or IMF suspending the loan.
Foreigners were net sellers of 392 million rupees ($3.4 million) worth of shares on Thursday. They have been net sellers in 32 out of the 40 trading sessions so far this year.
Foreigners, who had been net buyers since 2001, turned net sellers in 2009, selling 785.3 million rupees worth of shares. They have sold a net 5.5 billion rupees worth shares so far this year and 3 billion since the Jan. 26 presidential polls. For Sri Lanka's key political risks
However, analysts say the numbers are distorted due to the gradual exit of a U.S.-based hedge fund after its Sri Lankan-born founder was charged in an insider dealing case.
The bourse is still up 12.4 percent so far this year, following a 125 percent rally in 2009, one of the best in Asia.
Top mobile firm Dialog Telekom DIAL.CM rose 3.7 percen to 7 rupees, while top fixed-line phone operator Sri Lanka Telecom SLTL.CM closed 4 percent firmer at 38 rupees.
The day's turnover was 1.67 billion rupees ($14.6 million), around thrice of the 2009 daily average of 593.6 million rupees.
The Sri Lankan rupee LKR= closed firmer at 114.15/18 per dollar compared with Wednesday's close of 114.27/31 as banks sold dollars to cover their short positions in the rupee after the rupee liquidity slumped to a low level, dealers said.
The interbank lending rate or call money rate CLIBOR edged down to 9.336 percent from Wednesday's 9.336 percent.
reuters
The All-Share Price Index .CSE of the Colombo Stock Exchange closed 0.84 percent or 31.82 points up at 3805.85. It hit a record high of 3847.18 points on Tuesday.
"Local retail and institutional investors are confident that the government can tackle the deficit problem in the next budget after the April election," said Jaliya Wijeratne, director of institutional sales at SMB Securities.
"Foreigners are leaving and will be in a 'wait and see' mood after the IMF delay and deficit concerns ahead of the polls." Sri Lanka will hold legislative elections on April 8, after a presidential poll on Jan. 26.
On Tuesday, Sri Lanka's finance ministry said the 2009 budget deficit had hit an eight-year high of 9.7 percent of GDP, well over the 7 percent target set by the International Monetary Fund for a $2.6 billion loan. The ministry also said the country will miss the 2010 IMF deficit target as well.
The IMF last week said it would delay a third tranche of the loan until it sees the budget after the April 8 parliamentary polls.
Sri Lanka will initiate tax and investment reforms in its next budget following the election, a government official said on Thursday.
Analysts said local investors were looking to buy in high quantities after prices fell on Wednesday, but foreign investors continued their exit strategy, and would watch out for factors like further erosion in fiscal management, rating downgrades, political instability or IMF suspending the loan.
Foreigners were net sellers of 392 million rupees ($3.4 million) worth of shares on Thursday. They have been net sellers in 32 out of the 40 trading sessions so far this year.
Foreigners, who had been net buyers since 2001, turned net sellers in 2009, selling 785.3 million rupees worth of shares. They have sold a net 5.5 billion rupees worth shares so far this year and 3 billion since the Jan. 26 presidential polls. For Sri Lanka's key political risks
However, analysts say the numbers are distorted due to the gradual exit of a U.S.-based hedge fund after its Sri Lankan-born founder was charged in an insider dealing case.
The bourse is still up 12.4 percent so far this year, following a 125 percent rally in 2009, one of the best in Asia.
Top mobile firm Dialog Telekom DIAL.CM rose 3.7 percen to 7 rupees, while top fixed-line phone operator Sri Lanka Telecom SLTL.CM closed 4 percent firmer at 38 rupees.
The day's turnover was 1.67 billion rupees ($14.6 million), around thrice of the 2009 daily average of 593.6 million rupees.
The Sri Lankan rupee LKR= closed firmer at 114.15/18 per dollar compared with Wednesday's close of 114.27/31 as banks sold dollars to cover their short positions in the rupee after the rupee liquidity slumped to a low level, dealers said.
The interbank lending rate or call money rate CLIBOR edged down to 9.336 percent from Wednesday's 9.336 percent.
reuters
