Sri Lankan stocks fell to a 12-week closing low on Thursday as investors pulled back over worries the defection of some ruling party members would result in a hung parliament after the Jan. 8 presidential polls.
The main stock index closed down 0.89 percent or 63.83 points at 7,115.89, its lowest since Sept. 5, after falling 1.6 percent earlier in the session.
Eight loyalists from President Mahinda Rajapaksa’s United People’s Freedom Alliance, including Health Minister Mithripala Sirisena, have defected since Rajapaksa announced the snap poll last week. Sirisena has resigned to contest against Rajapaksa as the consensus candidate of a united opposition.
“The crossovers have raised concern over the political stability of the government and some believe it could result in a hung parliament, resulting in political instability,” a stockbroker said on condition of anonymity.
“At the moment, it is not clear who will win. But if we see a massive defection in parliament towards one side, then it will be clear who is going to win and that will help the market rebound.”
Continued buying by foreign investors, low interest rates and hopes of better corporate earnings pushed the bourse into the overbought zone by Nov. 18, before it slipped on political uncertainty. The bourse is near the oversold region since Friday, Thomson Reuters data showed.
Thursday’s turnover was 1.32 billion rupees ($10.08 million), exchange data showed, less than this year’s daily average of 1.44 billion rupees. Foreign investors bought a net 320.1 million rupees worth of stocks, extending purchases during the year to 20.12 billion rupees, exchange data showed.
Shares in biggest listed lender Commercial Bank of Ceylon Plc fell 4.40 percent, leading the losers, while fixed line telephone operator Sri Lanka Telecom Plc declined 3.51 percent. ($1 = 131.0000 Sri Lankan rupee) (Reuters)