COLOMBO Dec 15 Sri Lankan shares fell in line
with regional bourses to close at their lowest in more than two
weeks on Thursday, as a 25-basis-point interest rate increase by
the U.S. Federal Reserve and hints of more to come next year
kept investors on tenterhooks.
The Fed signalled a faster pace of increases in 2017 as
central bankers adapted to incoming President Donald Trump's
promises of tax cuts, spending and deregulation. Partly as a
result of the changes anticipated under Trump, the Fed sees
three rate hikes next year instead of the two foreseen as of
The Colombo stock index ended 0.21 percent weaker at
6,285.53, its lowest close since Nov. 30.
"Market was on a very slow downtrend," said Dimantha Mathew,
head of research, First Capital Equities (Pvt) Ltd.
"Bond and equity markets have adjusted for the Fed rate
hike. We have seen outflows in the last three months. But going
forward, we may go into a period of economic and political
uncertainty because of a large number of bonds maturing in the
first half on 2017 and local elections, plus a referendum coming
up next year."
The rate hike could increase borrowing costs of foreign
capital for Sri Lanka and force the coalition government to
borrow locally at higher interest rates, which could also see
some outward movement of money from equities, analysts said.
The government is considering a change in the country's
constitution next year which requires a referendum.
The two main parties in the coalition government are
expected to contest separately in the upcoming local government
election, which the administration of President Maithripala
Sirisena has postponed since mid-2015 citing delays in a new
Foreign investors bought a net 44.7 million rupees
($301,213) worth of shares on Thursday, with the year-to-date
net foreign inflow in shares declining to 514.7 million rupees.
Turnover was 361.8 million rupees, less than half this
year's daily average of 749 million rupees.
Shares of John Keells Holdings Plc fell 2 percent,
while top mobile phone operator Dialog Axiata lost 1.9
($1 = 148.4000 Sri Lankan rupees)
(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)