Island Nation closes stock trading after 2-week halt on worsening economic crisis

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By Malvika Gurung

Investing.com — Shortly after opening after a two-week halt on Monday, the crisis-torn Sri Lankan stock exchange closed on the day for the second time in April, as the main index plunged by 12.6% during the session amid the worsening economic crisis in the island country.

The country’s stock market remained closed for a week due to the Sri Lankan New Year holiday, followed by the country’s Securities & Exchange Commission abruptly ordering the Colombo stock exchange to remain halted for another week on April 16, in order to allow sufficient time for investors to adjust to current economic conditions in the country.

During the 2-week shutdown, the government raised interest rates and defaulted on its external debt worth $51 billion. It sent officials to Washington last week to negotiate a bailout with the International Monetary Fund, but the lender offered no immediate prospects for emergency funding.

Sri Lankan stocks have eroded 40% of their value since the start of 2022, while the local currency has also fallen in tandem against the US dollar.

Industry experts have criticized the country’s decision to shut down stock markets for such a long period, as shutdowns of this nature can dilute confidence in the Colombo Stock Exchange, especially from foreign investors who might find it unpredictable, said a key official at Asia Securities Ltd.

At a time when the country is “desperate” for the dollar, the shutdown had sent a negative signal and could lead foreign investors to postpone their investments for the sake of liquidity, added an analyst from JB Securities.

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