Shares in Sri Lanka plunged and were set for another day of trading halt as the market opened for the first time in two weeks during which the economic crisis deepened.
The Sri Lankan stock market’s Colombo All-Share Index fell 6.7%, while the blue-chip index fell 5.2% seconds after trading resumed. If the first-order index falls by 7.5%, it will trigger a second circuit. And if it drops further to 10%, the market will be closed for the day.
While trading in Sri Lanka was halted for the previous two weeks, the first week due to a public holiday and the second by the securities regulator, the central bank raised policy rates by a record, the government halted payments on foreign debt, while ratings companies reduced the country’s credit rating. Civil protests against the government over soaring food prices and fuel shortages have intensified.
Before Monday’s fall, the Sri Lanka Colombo Stock Exchange All Share Index had erased nearly a third of its value this year, following a global rally of 80% in 2021. Sentiment remains jittery as the government seeks up to $4 billion this year. year from international lenders to help ease shortages of food, fuel and medicine as its foreign exchange reserves dry up.
On April 16, Sri Lanka’s Securities & Exchange Commission abruptly ordered a week-long halt to trading, citing the need to give investors time to digest the country’s economic conditions.
The order came after the stock exchange had already been closed for a week for the traditional New Year holiday, drawing heavy criticism from the financial sector.
“Closures of this nature can dilute confidence in the Colombo Stock Exchange, especially from foreign investors who might find it unpredictable,” said Naveed Majeed, senior vice president for research at Asia Securities Ltd. in Colombo.
The extended shutdown, the longest since a seven-week shutdown at the height of the pandemic in 2020, had left traders dry.
At a time when the country is “desperate” for dollars, the shutdown had sent a negative signal and could lead foreign investors to postpone investments due to liquidity concerns, said JB Securities analyst Suramya Ameresekera.