June 13, 2024

Sri Lanka stock market closes early for the second day as shares tumble

1 min read

The Sri Lankan stock market shut early for a second straight day after a steep fall led by its biggest companies, as investors fled risky assets following a sharp rise in interest rates against the backdrop of an economic crisis in the country.

The CSE All-Share index closed 8.1% lower at 6,905.37 on Tuesday and is down more than 40% this year.

After two trading halts earlier in the session, the Colombo Stock Exchange said here the market will be closed for the rest of the day following a 10% slump in the blue-chip S&P SL20 index. The market shut just half an hour into trading on Monday.

The Central Bank of Sri Lanka earlier this month raised its key interest rates by an unprecedented 700 basis points to tame sky-high inflation amid shortages of basic goods in the heavily indebted country, after which the market was closed for two weeks.

Sri Lanka must tighten monetary policy, raise tax and adopt flexible exchange rates to address its debt crisis, a senior International Monetary Fund official said on Tuesday.

The island nation has begun discussions with China about refinancing its debt, according to a cabinet spokesman.

Sri Lanka said earlier this month it had become “challenging and impossible” to repay external debt, leading to several ratings downgrades and outrage over the government’s handling of the crisis.

Heavyweight stocks John Keells Holdings, LOLC Holdings and Expolanka Holdings plunged between 7.9% and 20%.

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