Sri Lanka shares gain for 5th session amid strong foreign inflows 

ECONOMYNEXT – Sri Lanka stocks edged up on Monday (05) for the fifth session mainly pushed by LOLC shares following a merger speculation, brokers said.

The market saw a net foreign inflow was 647 million rupees on Monday. The bourse has seen a net foreign inflow of 1.85 billion rupees so far this year after 3.24 billion rupees of net inflow in the last 15 straight sessions amid positive sentiment over an IMF deal.

The main All Share Price Index (ASPI) gained 0.54% or 49.94 points to 9,366.39, its highest since March
29.

The market saw a turnover of 4.1 billion rupees, higher than this year’s average daily turnover of
3.14 billion rupees.

“The market gained mainly on buying interest in LOLC shares after rumours that its subsidiary LOLC Finance and LOLC Development Finance are going for a merge,” a top market analyst said.

“However there was buying in other counters as market rose in the last few sessions.”

Officials at the LOLC were not immediately available for comments on the merger speculations.

The IMF lannounced that it reached a staff-level agreement with Sri Lanka on Thursday (01), with possible a 48-month 2.9 billion dollars in Extended Fund Facility (EFF) once the debt restructuring is done. Sri Lanka’s reform-oriented interim budget for 2022 also is seen as market positive.

The budget is aimed at almost doubling the tax-to-GDP ratio to 15 percent by 2025 from 8.2 percent at
the end of 2021. President Ranil Wickremesinghe, who is also the island nation’s finance minister,  raised the value added tax to 15 percent with effect from Thursday from 12 percent. The increase comes after he raised the VAT to 12 percent on May 31 from an earlier 8%.

Sri Lanka defaulted on its foreign debt on April 12 and deepened an economic collapse into a political crisis. Sri Lanka is facing its worst fuel and economic crisis in its post-independence era. The economy is expected to contract more than 8 percent this year.

The more liquid S&P SL20 index ended 0.70% or 20.94 points up at 3,030.55.

The main index ASPI has gained 17.3 percent in August after gaining 5.3 percent in July. It lost 9.3
percent in June, 23 percent in April, and 14.5 percent in March.

The index has lost 23.3 percent so far this year after being one of the world’s best stock markets with an
80 percent return last year when large volumes of money were printed.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

LOLC Finance pushed the index up, closing 19 percent higher at 10.6 rupees a share.

LOLC closed 4.6 percent up at 608.5 rupees a share and Dialog Axiata gained 5.9 percent to 9 rupees. (Colombo/Sept05/2022)