As foreign investors sold their shares in the Colombo Stock Exchange Tuesday, the Central Bank stepped in to preserve the value of the rupee.
By selling SLR 788 million in stock, foreign investors were heavy net sellers as Sri Lanka’s stock exchange resumed trading Tuesday after the Christmas holidays. Despite the foreign disinvestment, the main All Share Price Index gained 0.54 percent (32.51 points) to 6,015.09 as local investors (mainly government institutions) stepped in to buy.
Nearly 80% of the day’s turnover was in shares of the Commercial Bank, as international investors sold their share of the bank. This follows the news that a former Deputy Governor of the Central Bank – K. G. Dheerasinghe – who retied on December 15 has just been appointed as a director of the Commercial Bank and is expected to take over as chairman. Even prior to Tuesday’s trading, the government was already the second biggest stockholder in the Commercial Bank, through investments by government pension funds.
The day's offshore selling extended year-to-date outflow to SLR 18.8 billion, reported Reuters. That figure is on top of the record 26.4 billion rupees in stocks sold by foreigners in 2010.
On the same day, the Central Bank sold more than USD 50 million in order to defend the value of the Sri Lankan rupee. The rupee closed flat at 113.89/90 rupees a dollar for a 24th straight session on Tuesday. The Central Bank has spent around USD 610 million to keep the exchange rate steady since a 3 percent devaluation in the currency on 21 November 2011.
The Colombo Stock Exchange has fallen to Asia's ninth best performer with a year-to-date loss of 9.35 percent.
