(Reuters) - Sri Lankan stocks closed lower amid thin trade on Monday on rising interest rates after the central bank scrapped a lower repo penalty and priced a 30-year treasury bond at a higher rate on Friday.
The central bank on Friday removed a lower repo penalty rate of 5 percent starting Monday, five months after it adopted the measure to boost credit growth.
The bank accepted over 10 billion rupees at a weighted average yield of 11.73 percent at an auction of 30-year t-bonds on Friday after it originally planned to borrow only 1 billion rupees. Dealers said the yield was at least 200 basis points higher than what the market had expected.
The main stock index ended 0.78 percent lower, or 56.89 points down, at 7,244.40, its lowest close since Feb. 9.
"Investors are slightly worried and the retailers are keeping out of the market," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.
"The market will be stagnant until Wednesday's (t-bill) auction, which will show the direction on interest rates."
Shares of Ceylon Tobacco Company Plc fell 1.03 percent, while Dialog Axiata Plc dropped 1.67 percent.
Turnover was 642.3 million rupees ($4.83 million), its lowest since Feb. 16 and well below this year's daily average of 1.38 billion rupees.
Foreign investors were net buyers of 54.9 million rupees worth of shares on Monday, extending the year-to-date foreign inflow to 1.57 billion rupees.
The central bank on Friday removed a lower repo penalty rate of 5 percent starting Monday, five months after it adopted the measure to boost credit growth.
The bank accepted over 10 billion rupees at a weighted average yield of 11.73 percent at an auction of 30-year t-bonds on Friday after it originally planned to borrow only 1 billion rupees. Dealers said the yield was at least 200 basis points higher than what the market had expected.
The main stock index ended 0.78 percent lower, or 56.89 points down, at 7,244.40, its lowest close since Feb. 9.
"Investors are slightly worried and the retailers are keeping out of the market," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.
"The market will be stagnant until Wednesday's (t-bill) auction, which will show the direction on interest rates."
Shares of Ceylon Tobacco Company Plc fell 1.03 percent, while Dialog Axiata Plc dropped 1.67 percent.
Turnover was 642.3 million rupees ($4.83 million), its lowest since Feb. 16 and well below this year's daily average of 1.38 billion rupees.
Foreign investors were net buyers of 54.9 million rupees worth of shares on Monday, extending the year-to-date foreign inflow to 1.57 billion rupees.
($1 = 132.9000 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)
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