May 2020

A month with a mild recovery

Highlights

  • The activities in the economy, especially the industry and services sector, improved marginally in May. However, the economy was still operating with excess capacity.
  • CSE resumed trading on 11th May. ASPI rose 6% during the month, more as a correction from the steep fall witnessed earlier as investors picked up undervalued stocks. Foreign participation in the equities was mild and foreigners were net sellers.
  • Data indicates the CCPI has declined to 4% in May, which is now on the lower bound of the CBSL’s inflation target.
  • After almost 4 months of consecutive foreign capital outflows, in the last week of May debt market reported its first major weekly inflow. Rupee demonstrated a steady appreciation of about 4% throughout the course of the month helped by weaker imports. However, the reserve position deteriorated by USD 716 Bn mainly as a result of foreign currency loan payments.
  • Higher excess liquidity levels that prevailed during the previous month started to gradually decline throughout May. Money supply decreased by nearly LKR 22 Bn mainly on account of maturing long-term reverse repos issued in April and first half of May. Policy rate cut by the CBSL further eased the interest rates in the money markets.
  • The long-term rates also declined but, the spread between T-bill and AWPR widened marginally and was still higher than the pre-crisis level indicating the risk appetite of banks had not improved despite the efforts by the CBSL to maintain excess liquidity in the money markets.

Download the report to view the full content by clicking the below link.


Disclaimer

This publication has been prepared by ICRA Lanka solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ICRA Lanka does not represent that it is accurate or complete. ICRA Lanka does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication.