CSE sentiment hit by fuel crisis, high interest rates

Current investor sentiment in the Colombo Stock Exchange (CSE) is led by the exhausting fuel shortages exacerbated by the general difficulties stemming from this while high interest rates are also pushing traders to fixed income securities, stockbrokers and analysts said.

The fuel shortage has curtailed the movement of people, and which will hit the bottom lines of companies at large, Murtaza Jafferjee CEO JB Stockbrokers told the Business Times.

Analysts said a deep decline in the share market is inevitable. “We are talking about stock market performance when the whole country is at a standstill with shortages of essential items while the economy is close to collapse. In such a situation a bloodbath in the stock market is inevitable,” Umasudhan Subramaniam CEO - Universal Mind Mapper, a global company focusing on financial, business consultancy and training with offices in London, Colombo and Doha told the Business Times.

"The stock market is factoring in a possible ‘ disorderly default’ of the state. Disorderly default occurs when there is poor visibility on the relief and restructuring plan of a country’s defaulted debt."

He added that despite the Government expecting to complete the staff- level agreement with the IMF as soon as possible that would not bring the most needed immediate dollar funding for Sri Lanka. “The country must go for bridge financing with a friendly nation immediately.

The stock market is factoring in a possible ‘disorderly default’ of the state. Disorderly default occurs when there is poor visibility on the relief and restructuring plan of a country’s defaulted debt."

As the likelihood of this happening in the near future appears to be bleak, the CSE continues to slide,” he said.

For the market to see some sustainable recovery there must be a favourable change in the political situation of the country, analysts pointed out.

On the other hand, global markets have been falling recently due to high inflation, high-interest rates, and the resultant recession fears in what we call ‘stagflation’. The gloomy global scenario is a double whammy on CSE as the market is already struggling from the domestic crisis.

Stockbrokers also said that till last week there have been margin forced selling, but this has largely halted now as most margin calls are now sold out. “The IMF staff level agreement will send a positive message and will show the financial status and the government's plan for the country which will attract other countries to decide on grants and loans for Sri Lanka,” a stockbroker pointed out.