Tuesday, 19 November 2019 06:12

Stocks jump to more than 1-year high, rupee up after Rajapaksa poll win

REUTERS: Shares jumped to their highest in more than a year in heavy volume, while the rupee rose to a two-and-half month high yesterday, after former wartime Defence Secretary Gotabaya Rajapaksa won the presidency by a big margin.

The benchmark stock index, which jumped near 1.9% in early trade, ended 1.8% firmer at 6,129.56, its highest close since 10 August 2018. The Bourse rose 1.53% last week, and it is up 1.28% for the year.

The day’s gain was the biggest single-day rise since 29 July. “Since we already have the macroeconomic stability and now got the political stability, investors will be positive with expected growth in low interest rates,” said Dimantha Mathew, head of research at broker First Capital Holdings.

The rupee ended 0.5% firmer at 179.40/80 per dollar, its highest since 30 August. It closed at 180.10/30 on Friday and is up 1.8% so far this year.

Foreign investors were net sellers of riskier assets for an eighth straight session on Monday.

They sold a net Rs. 391.6 million ($ 2.18 million) worth of shares yesterday, extending the net foreign outflow from the equities market to Rs. 8 billion for the year, according to index data.

Equity market turnover was Rs. 2.4 billion, its highest since 17 September and well above this year’s daily average of about Rs. 696 million. Last year’s daily average was Rs. 834 million.

Rajapaksa made national security his top priority after being sworn in on Monday at an ancient temple in the north-central city of Anuradhapura, where he received blessings from Buddhist monks. The majority of Sinhala Buddhists voted for him after he campaigned on promises to make the nation safer in the aftermath of the Easter bombings earlier this year.

Standard Chartered Bank (SCB), in a note to investors, said the election outcome was positive for Sri Lanka and reduced political uncertainty, which should boost economic growth.

“Sri Lanka’s political establishment faces the twin economic challenges of boosting growth and improving debt sustainability. We expect support across party lines for ongoing cooperation with the IMF to address these problems,” SCB said in the note.

It also said: “Negotiating a new IMF program is crucial to ensuring market access, in our view, given large upcoming government external refinancing needs of $ 3 billion a year over the next five years. We expect the IMF to remain supportive; it has already agreed to a slower pace of fiscal consolidation.”

Analysts before the election had raised concerns over giveaways promised by the two top presidential candidates, after officials and a credit rating agency warned that their pledges could push the country deeper into debt.

Rajapaksa has vowed to cut by half a value-added tax of 15% and abolish some taxes as a way to reignite consumption.

Meanwhile, foreign investors bought government securities on a net basis for the fourth time in six weeks, buying a net Rs. 2.2 billion worth of government securities in the week ended 13 November.

Total foreign outflows from government securities through 13 November stood at Rs. 48 billion, Central Bank data showed.

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