The total foreign outflows at the Colombo bourse during the third quarter of the current year stood at Rs. 2,456 million mainly on the back of political uncertainty over the new national government policies along with the lack of clarity on the economic direction, analysts said.
“Heavy foreign exits from both the debt and equity markets resulted in a depreciation of the foreign exchange rate during the quarter. Therefore, during the quarter the local currency depreciated by 6.1 against the US$. We expect this to have an adverse effect on the Balance of Payment (BOP) as the country is more inclined towards imports,” a SC Securities research report said.
It added that pressure was placed on the BOP with high level of vehicle imports reported in July with a 223 per cent year on year (YOY) increase and in August with a 218 per cent YoY increase. The report said that during July total vehicle registrations stood at 61839, which was the second highest month of imports for the year after 66889 vehicle registrations were reported in March. “However, with increased vehicle importation in place, we believe banks with considerable foreign currency reserves (will) post considerable gains. Also good results can be expected from export oriented businesses as well,” the report added.
“Also due to the uncertainty that existed in the global markets with the Chinese government devaluing the Yuan, the Russian ruble weakening, continued geopolitical instability in the Middle East region, sanctions in Iran and uncertainty in the EU region with troubled Greece we expect a contraction in the exports during the quarter,” the report added.
It said that during the three months to July-September end, the All Share Price Index (ASPI) performed reasonably well. The quarter started off with ASPI at 6983 points and reached 7499 points following the end of the election on the 19 August. The quarter ended with the benchmark index failing to 7079 points end September.
The average ASPI during the quarter stood at 7219 points. The ASPI dropped 3.7 per cent year to date at the end of September. Foreigners remained net sellers during July and August with heavy outflows from the bourse with Rs. 2.730 million. However, in September the trend reversed with net inflows of Rs. 274 million as foreigners started to enter the market.
“Heavy foreign exits from both the debt and equity markets resulted in a depreciation of the foreign exchange rate during the quarter. Therefore, during the quarter the local currency depreciated by 6.1 against the US$. We expect this to have an adverse effect on the Balance of Payment (BOP) as the country is more inclined towards imports,” a SC Securities research report said.
It added that pressure was placed on the BOP with high level of vehicle imports reported in July with a 223 per cent year on year (YOY) increase and in August with a 218 per cent YoY increase. The report said that during July total vehicle registrations stood at 61839, which was the second highest month of imports for the year after 66889 vehicle registrations were reported in March. “However, with increased vehicle importation in place, we believe banks with considerable foreign currency reserves (will) post considerable gains. Also good results can be expected from export oriented businesses as well,” the report added.
“Also due to the uncertainty that existed in the global markets with the Chinese government devaluing the Yuan, the Russian ruble weakening, continued geopolitical instability in the Middle East region, sanctions in Iran and uncertainty in the EU region with troubled Greece we expect a contraction in the exports during the quarter,” the report added.
It said that during the three months to July-September end, the All Share Price Index (ASPI) performed reasonably well. The quarter started off with ASPI at 6983 points and reached 7499 points following the end of the election on the 19 August. The quarter ended with the benchmark index failing to 7079 points end September.
The average ASPI during the quarter stood at 7219 points. The ASPI dropped 3.7 per cent year to date at the end of September. Foreigners remained net sellers during July and August with heavy outflows from the bourse with Rs. 2.730 million. However, in September the trend reversed with net inflows of Rs. 274 million as foreigners started to enter the market.
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