Sri Lanka’s stock market opened after a seven-week trading halt only to shutter within minutes following a more than 10% drop in a gauge of blue chip shares, highlighting the risks of a long hiatus.
The benchmark Colombo All Share Index settled 3.9% lower at 4,392.43 after a slide at the open in a measure of the nation’s top 20 stocks by market capitalization triggered a circuit breaker that ended trading today.
The stock exchange had already shortened operations to two hours as the island nation’s capital remains under curfew even as the government allowed public and private companies to resume operations from Monday.
“There’s likely to be pent up selling, but as global markets pick up with economies slowly opening up, it might limit some of the downward pressures,” said Sanjeewa Fernando, a strategist at CT CLSA Securities Pvt. in Colombo. Investors would also look at how the Sri Lankan economic recovery unfolds, and how debt management is handled, he said.
The South Asian nation’s stocks are trading at their lowest level in almost a decade after missing out on a worldwide equities rebound in April. Sri Lanka and Bangladesh exchanges were among a handful of global stock markets that halted trading in March after the Covid-19 pandemic shut down economies and pummelled equities. The Bangladesh bourse remains shut after last trading on March 25, marking its longest closure since 1976.
Sri Lanka’s monetary authority on May 6 cut benchmark interest rates for a third time since the coronavirus outbreak to bolster the economy against the fallout of the pandemic. Sri Lanka had registered 797 coronavirus infections and nine deaths, according to data compiled by John Hopkins University as of May 7.
“This should have been expected with foreign investors keen to liquidate their stakes,” said Pasindu Perera, head of research at Candor Equities Ltd. in Colombo. “This crisis is unlike any other, and we may just be at the start of it. So in the short to medium term the selling will persist.”