ASPI gains 47 points while government securities yields fall and foreign investors extend selling in equities but keep buying bonds
Key Highlights
- ASPI closed up 47.38 points (+0.22%) at 21,417.47; S&P SL20 dipped 2.67 points (-0.04%) to 5,985.49
- Market turnover surged to LKR 3.81 billion, 40.7% above the monthly average of LKR 2.7 billion
- Foreign investors posted a net equity outflow of LKR 2.36 billion, extending YTD outflows to LKR 52.6 billion
- Government securities yields fell sharply across the curve, down as much as 45 basis points week-on-week
- Foreign holdings of government securities rose 2.14% week-on-week to LKR 192.9 billion, continuing a six-week climb
- The rupee held broadly stable, depreciating marginally to LKR 335.45/USD from LKR 335.43/USD
Stock Market Summary
The Colombo Bourse closed higher, with the ASPI gaining 47 points to end at 21,417.47, while the S&P SL20 slipped marginally to 5,985.49 — a divergence pointing to gains concentrated outside the most liquid blue-chip names. Trading activity was well above normal levels, with turnover reaching LKR 3.81 billion, an increase of 40.7% over the monthly average, and volume rising 1.3% to 123.88 million shares. The Retailing sector led turnover with a 28% share, while Telecommunications and Capital Goods together contributed a further 36%. Retail Holdings was the single largest contributor to both turnover and volume. Foreign investors remained net sellers of equities, posting a net outflow of LKR 2.36 billion for the day, with Retail Holdings, Dialog Axiata and John Keells Holdings seeing the largest net foreign selling.
Fixed Income Summary
Government securities yields declined sharply across short, medium and long tenors, with the 6-year tenor falling 45 basis points week-on-week and several other tenors down 30 to 40 basis points. The move was mirrored at the primary market level, where Treasury bill auction yields eased across all three maturities compared to the prior auction. Secondary market activity was active across the curve, from short-dated bills through to bonds maturing in 2037. Overnight liquidity in the banking system expanded to LKR 256.4 billion from LKR 246.8 billion. Foreign holdings of government securities continued their steady climb, rising 2.14% week-on-week to LKR 192.9 billion, up from roughly LKR 135.9 billion in late June — a trend that stands in contrast to the ongoing foreign selling seen in equities.
Currency Market Update
The rupee was largely stable against the US dollar, depreciating marginally to LKR 335.45 from LKR 335.43 previously. The modest movement came against a backdrop of expanding overnight liquidity and continued foreign inflows into government securities, factors that have generally supported currency stability in recent sessions.
Business Impact
Today’s data points to a market with healthy secondary liquidity and falling borrowing costs, even as foreign investors continue to draw down equity positions. The contrast between foreign selling in equities and steady foreign buying in government securities suggests external investors are differentiating between asset classes rather than reducing overall exposure to Sri Lanka. For businesses, the decline in government securities yields is a potentially favorable signal for future borrowing costs, while elevated equity turnover indicates improved market liquidity for companies considering capital raises. The persistent equity outflow, however, remains a trend worth monitoring, particularly for its potential effect on large-cap share liquidity over time.
What to Watch Next
- Whether the decline in government securities yields continues into the coming week or stabilizes after this move
- Whether foreign equity selling persists or shows signs of moderating from current YTD levels
- Sector rotation trends, given the concentration of turnover in Retailing, Telecommunications and Capital Goods
- Further movement in foreign holdings of government securities as a gauge of external confidence in local currency debt
Source Attribution
Source: Colombo Stock Exchange market data, Central Bank of Sri Lanka statistics and publicly available market information.