Sri Lankan stocks fell and were set for another day of trading stoppage when the market opened for the first time in two weeks, during which the economic situation worsened.
Within seconds after resuming trading, the Sri Lanka Stock Exchange Colombo All-Share Index plunged as much as 6.7 percent, while the blue-chip index fell 5.2 percent. If the blue-chip index falls by 7.5 percent, a second circuit will be activated. If it falls below 10%, the market will be closed for the day.
While trading in Sri Lanka had been halted for the previous two weeks – the first due to a holiday and the second by the securities regulator – the central bank raised policy rates to an all-time high, the government halted payments on foreign debt, and the rating agencies slashed the country’s credit rating. Protests against the administration have risen as a result of rising food prices and gasoline shortages.
Before Monday’s drop, the Sri Lanka Colombo Stock Exchange All Share Index has lost about a third of its value this year, following an 80 percent surge in 2021. The mood remains tense as the government seeks up to $4 billion from overseas lenders this year to help alleviate food, fuel, and medicine shortages as its foreign reserves dwindle.
On April 16, the Securities and Exchange Commission of Sri Lanka temporarily halted the stock exchange for a week, citing the need to allow investors time to assess the country’s economic realities.
The decision came after the exchange had already been closed for a week for the annual new year vacations, which drew harsh condemnation from the financial industry.
The extended stoppage, the longest since a seven-week halt during the pandemic’s peak in 2020, had left traders in the dark.
The shutdown sent a negative signal at a time when the country is “desperate” for dollars, and may cause foreign investors to postpone their investments due to liquidity concerns, according to Suramya Ameresekera, the analyst at JB Securities.
