COLOMBO (BLOOMBERG) – Stocks in Sri Lanka plunged, triggering a trading halt for the rest of the day, shortly after the market opened for the first time in two weeks.
Sri Lanka’s blue-chip index sank 12.6 per cent, exceeding the 10 per cent drop that would result in an all-day suspension.
The benchmark Colombo All-Share Index fell as much as 6.7 per cent as investors worry about the nation’s economic crisis.
While trading in Sri Lanka was halted for the previous two weeks, – the first week due to a holiday and the second by the securities regulator – the central bank hiked policy rates by a record, the government halted payments on foreign debt, while rating companies slashed the nation’s credit rating.
Civil protests against the government over soaring food prices and fuel shortages also intensified.
Prior to Monday’s fall, the Sri Lanka Colombo Stock Exchange All Share Index had erased almost a third of its value this year, after a world-beating rally of 80 per cent in 2021.
Sentiment still remains jittery as the government seeks up to US$4 billion (S$5.5 billion) this year from international lenders to help ease shortages of food, fuel and medicine as its foreign reserves dry up.
The Securities & Exchange Commission of Sri Lanka on April 16 abruptly ordered the stock exchange to be halted for a week, citing the need to give investors time to digest the country’s economic conditions.
The order came after the exchange had already been shut for a week for the traditional new year holidays, drawing sharp criticism from the financial industry.
“Closures of this nature can dilute the confidence on the Colombo Stock Exchange, especially from foreign investors who might find this to be unpredictable,” said Mr Naveed Majeed, senior vice-president for research at Asia Securities in Colombo.
The prolonged shutdown, the longest since a seven-week halt during the peak of the pandemic in 2020, had left traders high and dry.
At a time when the country is “desperate” for dollars, the closure had sent a negative signal and may lead foreign investors to put off their investments on liquidity concerns, said JB Securities analyst Suramya Ameresekera.
