(Island) Fed interest rate hikes likely to benefit frontier markets like Sri Lanka: Analysts

By Hiran H. Senewiratne

Overall performance of the Colombo Stock Exchange turned out to be favorable yesterday as U.S. Federal Reserve raised short term interest rates for a third time this year and predicted more increases to follow in 2018.

Backed by this sentiment, the market performance went up by 0.8 points with all sectors performing well including the plantation sector which hadn’t been so in the recent past.

With the US interest rate hikes, it is likely that foreign investors will invest in frontier markets like Sri Lanka, so coming weeks could see more buoyant market”, activity, analysts said.

Amidst these developments All Share Price Index went up by 8.5 points and S and P SL20 went down by 08 points while the overall turnover stood at Rs 1.2 billion with two crossings.

Amana Bank crossed 50 million shares to the tune of Rs 190 million and per share value Rs 3.80 and Softlogic Holdings 2.6 million shares crossed for Rs 32.5 million and per share value Rs 12.50.

In the retail market companies that mainly contributed to day’s turnover were JKH Rs 698.6 million (4.8 million shares traded), Melstacope Rs 66.2 million (1.1 million shares traded) and NDB Rs 59.8 million (450,000 shares traded).

When analyzing the market JKH contributed more than half to the day’s turnover with mainly foreign-investor-buying. During the day 66.3 million share volume changed hands in 3040 share transactions.

The U.S. economy is heading into 2018 with strong momentum that’s likely to boost wages and inflation more broadly, requiring the Federal Reserve to raise interest rates four times next year, Goldman Sachs Group Inc. economists said in a research note.

The New York-based investment banking and securities firm raised its growth outlook for 2018 to 2.5 percent and lowered its forecast for unemployment to 3.7 percent by the end of 2018, said Goldman Sachs which was released by email late Friday.

Before the latest revision the most recent Goldman Sachs forecast for 2018 growth was 2.4 percent, according to forecasts compiled by Bloomberg.

The U.S. jobless rate, which was 4.1 percent in October, may reach 3.5 percent in late 2019, Goldman predicted. That would be the lowest level since the late-1960s.

“Our projections would imply an evolution over the current cycle from the weakest labor market in postwar U.S. history to one of the tightest,” the economists said in a summary of their report. “We expect that a tight labor market and a more normal inflation picture will lead the Fed to deliver four hikes next year.”

 

Source: The Island

Image Courtesy: CNN Money