Sri Lanka halts stock trading twice amid mounting economic crisis

The stock exchange suspended trading for 30 minutes twice, first when the gauge fell 5%, then when it declined to more than 7.5%

Sri Lanka’s stock market trading was halted twice on Wednesday after a gauge of blue-chip shares tumbled more than 8 per cent, highlighting the mounting economic crisis prompted by a shortage of dollars and surging inflation. 

The benchmark Colombo All Share Index settled 2.7 per cent lower at 11,285.37 after a slide in a measure of the nation’s top 20 stocks by market capitalisation triggered a circuit breaker. The stock exchange suspended trading for 30 minutes twice, first when the gauge fell 5 per cent, then when it declined to more than 7.5 per cent.

“Macro-worries are increasing. There are margin calls and forced selling,” said Udeeshan Jonas, chief strategist at CAL Securities in Colombo. “The ability of companies to pass on costs to customers is reducing.”

A surge in energy prices as tensions around Ukraine mount has added to the woes of Sri Lanka, which is already facing Asia’s fastest pace of inflation while grappling with dwindling foreign-exchange reserves that have raised concerns about the risk of defaults.

Sri Lanka’s central bank on Tuesday released dollars to pay for diesel imports for at least the second time this year, according to Governor Ajith Nivard Cabraal.

Corporate profits face a series of obstacles as currency problems squeeze inventory and production, while higher oil prices hit costs, CAL’s Jonas said.