Sri Lanka Stock Picks

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Monday, July 4, 2011

Sri Lanka bourse at 6-mo lows on low liquidity

* Turnover falls below 1 bln rupee mark first time in 3 1/2 months

* Over 30 bln rupee locked up in private placement, IPO-official

* Rupee steady despite importer dlr demand on state bank selling

COLOMBO, July 4 (Reuters) - The Sri Lankan stock market fell to six-month low on Monday with turnover too slumping to its lowest this year due to a cash crunch as large amount of money is locked in private placements and initial public offerings.

Sri Lanka's main share index fell 0.41 percent or 27.97 points to 6,816.74, to its lowest close since
Jan. 6.

The day's turnover was 845 million rupees ($7.7 million), its lowest since Dec. 17, well below last year's average of 2.4 billion and this year's daily average of 2.82 billion. Since June 1, it has shed 8.1 percent mainly due to forced selling, in line with the policy of the regulator Securities and Exchange Commission (SEC) to recover credits, aiming to eliminate all credit dealing by end 2011.

Over 6 billion Sri Lankan rupees has been still locked up in the two recent initial public offerings.

On Monday, the SEC's Director General Malik Cader said there may be over 30 billion rupees of liquidity locked in private placements and IPOs since February this year.

The bourse is still up 2.73 percent so far this year. It was the top performer in the Asia-Pacific in 2010 and 2009 with 96 percent and 125 percent returns, respectively.

Foreign investors were net sellers of 21.9 million rupees worth of shares on Monday, and have sold a 7.57 billion rupees in 2011 after a record 26.4 billion in 2010. Traded volume was 56.6 million, against a five-day average of 70.5 million. The 30-day and 90-day average trading volumes were 180.5 million and 103.6 million, respectively.

Last year's daily average was 67.9 million. The rupee closed flat at 109.49/50 a dollar.

A state bank sold dollars at a steady rate of 109.50 despite importer demand for the 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 extent of the rupee's appreciation.

source - www.reuters.com