Equity turnover surged past monthly averages even as indices dipped, while government bond yields steepened at the long end and the rupee firmed marginally
Key Highlights
Sri Lankan markets saw a mixed session on Thursday: equities recorded a sharp jump in trading activity but closed slightly lower, government bond yields rose notably at the long end of the curve, and the rupee edged marginally firmer against the US dollar.
Stock Market Summary
The ASPI closed at 21,129.21, down 19.50 points or 0.09%, while the S&P SL20 eased 6.05 points, or 0.10%, to 5,939.98. Both indices had traded in positive territory during the morning session before profit-taking pulled the market lower into the close. Daily turnover reached LKR 4.35 billion, more than 150% above the monthly average of LKR 1.7 billion, with trading volume at 117.1 million shares. Capital Goods led sector turnover at roughly 31%, followed by Retailing and Telecommunications, which together contributed a further 40%. Foreign investors were net buyers on the day, with a net inflow of LKR 955.2 million, though this was driven largely by concentrated buying in a single counter; month-to-date and year-to-date foreign flows remain negative, at -LKR 2.17 billion and -LKR 36.28 billion respectively.
Fixed Income Summary
Activity in government securities was steady across the curve amid sustained buying interest. Short-tenor yields were flat to marginally lower week-on-week, while longer tenors rose sharply — the 10-year tenor climbed 35 basis points to 12.65% and the 13-year tenor rose 23 basis points to 12.85%. Overnight liquidity in the banking system contracted to LKR 183.34 billion from LKR 195.00 billion. Foreign holdings of government securities extended a multi-week uptrend, rising 3.30% week-on-week to LKR 182.39 billion.
Currency Market Update
The rupee appreciated marginally against the US dollar, closing at LKR 336.05 compared to LKR 336.18 in the prior session.
Business Impact
The elevated equity turnover alongside a softer index close suggests active repositioning by institutional and high-net-worth investors rather than broad-based buying pressure. On the fixed income side, the steepening at the long end of the yield curve may point to higher financing costs for longer-duration instruments, even as short-term funding conditions remain comparatively stable. Continued foreign appetite for government securities, in contrast to the more volatile equity foreign flows, offers a steadier signal of foreign investor positioning in the local market.
What to Watch Next
Markets will be watched for whether Thursday’s equity turnover spike reflects a sustained shift in investor activity or a one-off event, and whether long-tenor bond yields continue to steepen in coming sessions. Foreign flow trends in both equities and government securities remain worth tracking, given the contrasting signals between the two markets this week.
Source Attribution
Source: Colombo Stock Exchange market data, Central Bank of Sri Lanka statistics and publicly available market information.