The Colombo Bourse witnessed a revival in activity levels as investors rallied on the back of Fitch's upgrade of Sri Lanka's credit rating from CCC+ to B-.

The ASPI closed with a gain of 75 points and settled at 21,054, whilst the S&P SL20 closed at 5,929, having gained 19 points. The index succumbed to negative pressure in the early hours of trading, before reversing course and ascending continuously and sharply as the positive news caught investor attention.

Both retail and HNW investor participation witnessed a revival from the subdued levels seen in the previous few sessions, leading to a turnover of LKR 1.4Bn. This depicts a sharp rise from yesterday’s turnover, although 41.3% below the monthly average level.

The highest contribution to turnover came from the Capital Goods sector, amounting to 25%, followed by the Materials sector and the Banking sector, which jointly produced 30%. Foreign investors turned net sellers, posting a net outflow of LKR 62.1Mn.

BOND MARKET

Yield curve slips by 10-15bps following the sovereign rating upgrade

The secondary market yield curve experienced mixed sentiment today. Prior to the sovereign rating upgrade, the yield curve came under selling pressure, leading to a slight increase in yields.

However, following Fitch Ratings’ upgrade of Sri Lanka’s sovereign rating to B- from CCC+, the yield curve across the board edged lower by 10bps to 15bps compared to yesterday as buying momentum emerged.

Both investor participation and market volumes appeared moderate today. In the 2030 segment, the 01.08.2030 and 15.10.2030 maturities traded between 11.30% to11.10% and 11.30% to11.15%, respectively. Meanwhile, the 01.02.2031 maturity traded between 11.35% to11.17%.

Further along the curve, the 01.10.2032 maturity traded at 11.35%, while the 15.12.2032 maturity traded between 11.50% to11.45%. In the 2033 segment, the 01.06.2033 maturity traded between 11.80% to11.70%, while the 01.11.2033 maturity traded in the range of 11.85% to 11.70%.

The 15.06.2034 maturity changed hands at 11.95%. Furthermore, the 15.10.2034 maturity traded between 11.95% to11.85%, while the 15.06.2035 maturity traded at 12.00%.

On the external front, the LKR depreciated against the USD, standing at LKR 330.81/USD, compared to LKR 330.35/USD seen earlier. Market liquidity in the banking system contracted to LKR 294.09Bn compared to LKR 325.72Bn recorded previously.

-First Capital Research-