Sri Lanka Stock Picks

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Thursday, June 23, 2011

Sri Lanka stx at 5-1/2-mo low on margin calls, liquidity crunch

* Speculative buying continues as index falls below 6,900

* Foreigners sell net 143.1 million rupees worth shares

* Rupee steady on state bank's dollar sales

COLOMBO, June 23 (Reuters) - Sri Lankan stocks fell on Thursday for a fourth straight session, hitting a new five-and-half month closing low in thin trade, weighed down by margin calls that forced selling across the board and low liquidity.

Sri Lanka's main share index closed down 0.81 percent, or 56.06 points, to 6,871.68, its lowest since January 6, Reuters data showed. It had shed 7 percent in June alone, but has gained 3.55 percent so far this year. The Colombo bourse was the Asia Pacific's top performer in 2010 and 2009 with 96 percent and 125 percent returns respectively.

Analysts said forced selling by brokers continued to recover credits in line with the policy of the regulator Securities and Exchange Commission (SEC), while over 6 billion rupees has been locked up in the two recent initial public offerings.

Foreign investors were net sellers of 143.1 million rupees worth of shares on Thursday and have sold a net 6.4 billion rupees worth shares in 2011 after a record 26.4 billion in 2010.

The day's turnover was 1.8 billion Sri Lanka rupees ($16.4 million), well below last year's average of 2.4 billion and this year's daily average of 2.88 billion.

Traded volume was 115.4 million, against a five-day average of 138.5 million. The 30-day and 90-day average trading volumes were 185.5 million and 106.3 million, respectively. Last year's daily average was 67.9 million.

The rupee closed steady at 109.58/60 a dollar as state bank, through which the central bank directs the market, sold dollars at a flat rate of 109.60 rupees despite heavy importer demand for greenback, dealers said.

FACTORS TO WATCH:

- Whether foreign investors will buy shares in large volumes.

- Whether Sri Lanka can achieve an 8.5 pct growth target amid rising global oil prices and inflation.

- The extend of the rupee's appreciation.

source - www.reuters.com