Sri Lankan stocks closed at a near five-week low on Wednesday, falling for an eighth consecutive session, as investor concerns over rising interest rates and political uncertainty weighed on sentiment. The main stock index lost 0.3 percent, or 19.86 points, to 7,110.19, its lowest close since February 5, extending the fall to 2.83 percent in the last eight sessions.
"Interest rates are on the rise and we don't know if it will rise further," a stockbroker said on condition of anonymity. "So, investors are waiting for some direction on interest rates." Foreign investors were net buyers of 97.9 million rupees worth of shares, extending the year-to-date foreign inflow to 2.58 billion rupees. Yields on t-bills rose between 21 basis points and 38 basis points at a weekly auction on Wednesday with the 91-day t-bill yield rising to a 14-month high of 7.10 percent.
The central bank has raised more than 105.3 billion rupees ($792.33 million) this week alone through the sale of development bonds and government securities. It also plans to raise a further 20 billion rupees ($150.49 million) via t-bonds on Thursday. The heavy borrowing by the government has resulted in a spike in market interest rates. Political uncertainty has also weighed on sentiment with elections to Sri Lanka's 225-member parliament expected to be announced after April 23. It is unclear whether the ruling coalition led by President Maithripala Sirisena would contest unitedly or go to the polls separately. Shares in Ceylon Tobacco Company Plc fell 0.97 percent and top fixed-line phone operator Sri Lanka Telecom lost 1.5 percent. Turnover was 946.2 million rupees, well below this year's daily average of 1.37 billion rupees.
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