Rupee falls on thin volumes

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By 2017-04-12

By Paneetha Ameresekere

The exchange rate (ER) in the interbank foreign exchange (FX) market saw the market's trading instruments, namely the two weeks' forwards and the one month's forwards fall by 20 and 15 cents to Rs 153.20 and Rs 153.70 to the US dollar respectively on thin trades yesterday, market sources told this reporter.
Volumes however were thin, and with demand getting the better of supply at least for the second consecutive market day on such parsimonious volumes, the rupee naturally fell, they said. The benchmark, but administered 'spot' rate remained unchanged at Rs 151.60 to the dollar, sources said.

As a result of such ER controls, the market prefers to deals in longer tenures such as two weeks' and month's forwards to find the true value of the dollar. Volumes are thin due to the forthcoming 'Avurudu' holidays, resulting in the bulk of the transactions in the market, having had already been covered.

Money printing: Rs 277B
Central Bank of Sri Lanka (CBSL) retired Rs 10,767 million worth of its Treasury (T)-Bill holdings yesterday, thereby bringing down the same by 3.74% to Rs 276,992.32 million over Friday's figures.

Monday was a holiday to the markets because of Poya. These figures represent CBSL's T-Bill holdings plus related borrowing costs to the Government of Sri Lanka (GoSL). Those figures are also known as money printing (MP). As a result of these actions, coupled with the fact that yesterday and today are back to back market days, GoSL's borrowing costs on account of MP declined by Rs 276.88 million (3.35%) to Rs 7,995.51 million over Friday's figures.

Nonetheless, the money market's excess liquidity also declined by Rs 3,188 million (28.93%) to Rs 7,830 million, though the market enjoyed net foreign inflows (NFIs) to the tune of Rs 7,574 million (US$ 49.96 million) yesterday. Conversions are based on the benchmark, but controlled 'spot' rate which was also at Rs 151.60 to the dollar on Thursday. CBSL deals in 'spot.' 'Spot' trades are settled after two market days from the date of transaction.

The Bourse made gains for the 10th consecutive market day yesterday, albeit on a pyrrhic performance, recording its 9th lowest turnover and 14th lowest share volume (SV) in the calendar year to date.
The Bourse made a Rs 281.59 million turnover on a 9.54 million SV yesterday, with the benchmark ASPI and the more sensitive S&P SL 20 Index gaining by 0.20% each to 6,305.54 points and 3,588.89 respectively.
Rising interest rates which make the fixed income market a better choice for investments do not justify the rapid gains made by the Bourse in the past few days. Those gains may be attributed to the herd instinct displayed by local investors, following foreign investors, though the latter's interest in blue chips, being translated to other stocks as well, including junk stocks, in a misplaced interest by locals, thereby pushes up the Bourse.

Yesterday, the Bourse enjoyed NFIs for the 15th consecutive market day with a figure of Rs 49.04 million, thereby taking NFIs in the calendar year to date to Rs 7.29 billion. Yesterday's NFIs were led by the market's largest capitalized stock JKH (Rs 50.37 million).

The single biggest contributor to the day's turnover was the market's 3rd largest capitalized stock Com Bank (Rs 98.26 million), followed by JKH (Rs 70.92 million). Those two stocks also contributed to yesterday's 4th and 5th largest SVs with figures of 725,167 and 473,776 respectively. Com Bank closed, up 0.30% to Rs 135.50 a share and JKH, up 0.67% to Rs 150 a share.
Meanwhile, the largest contributor to the day's SV was second tier stock Sierra Cables (1.8 million), followed by junk stocks Adam Investments (822,110) and Nation Lanka Finance (851,568) respectively. Sierra's contribution to yesterday's turnover was Rs 5.95 million, Adam's (Rs 582,167) and Nation's (Rs 851,568). Adam closed flat at 70 cents a share, while Nation Lanka's shares gained by 10% to Rs 1.10 a share.

In related developments, the eight lowest turnover figures the market has thus far recorded in ascending order in the calendar year to date are Rs 132.46 million on 1 February, Rs 171.40 million (18 January), Rs 179.32 million (30 January), Rs 183.13 million (13 March), Rs 208.10 million (24 January), Rs 237.71 million on 6 January, Rs 240.94 million (14 March) and Rs 272.13 million (16 March).

And the 13 lowest SVs thus far recorded in ascending order are: 3.01 million (20 January), 4.75 million (1 February), 6.37 million (30 January), 6.52 million (18 January), 6.98 million (2 January), 7.406 million (6 January), 7.408 million (23 March), 8.17 million (3 February), 8.43 million (3 January), 8.56 million (24 January), 8.74 million (13 March), 8.86 million (26 January) and 9.39 million (8 February).

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