News & market updates

Foreign holdings in Sri Lanka rupee bonds rose by a net US$97.1m in the week to July 9, lifting foreign holdings to Rs168,895m — the highest since Aug 10, 2023. The inflow coincided with the rupee recovering to about 330/USD and a 100bp May policy rate hike by the Central Bank.

Sri Lanka's foreign reserves fell 6.2% to US$6,450m at end-June 2026. The central bank net-bought US$70.5m in June and US$556.4m in H1 2026, but the decline could pressure IMF reserve targets and future disbursements.

ADB lowers developing Asia and Pacific growth to 4.9% for 2026 (from 5.5% in 2025), a 0.2 percentage point downgrade from April due to prolonged energy-market disruptions. It raises regional inflation to 4.3% for this year and warns of risks from tighter financial conditions, supply-chain strains and higher fertilizer/commodity costs.

ADB retains Sri Lanka's 2026 GDP growth forecast at 4%, lowers 2027 to 4.0% from 4.2% citing the recent 100 basis-point rate hike, and raises 2026 inflation to 6% due to domestic fuel price rises and electricity tariff increases.

Asian stocks rose sharply, led by chip and AI firms, as investors brushed off Middle East attacks; SK Hynix priced its ADR at $149, raising about $26.5bn. Brent crude was set for a 5% weekly rise to $76.03/bbl and Japan's yen firmed after finance minister comments.

Colombo market fell for an eighth session as ASPI dropped 0.60% (130.78 pts) to 21,697.72 amid renewed Middle East tensions, with turnover over Rs.1.4bn and foreign net outflow of Rs.91.7m. Declines were led by Commercial Bank, Melstacorp, Hayleys and John Keells, while capital goods, food & beverage and banking drove turnover.

Sri Lanka's ASPI fell 0.60% to 21,697.72 as markets slowed amid escalation in the Middle East and global instability. Seylan Bank, Lanka IOC and Malwatte Valley Plantations were among gainers while Commercial Bank, Melstacorp, Lion Brewery and Hayleys led declines; Vidullanka authorised a first gross dividend of Rs0.20 per share to be dispatched by Aug 7, 2026.

The weekly Treasury Bill auction raised the full Rs.100 billion with weighted average yields broadly steady: 91-day 10.21%, 182-day 10.30% and 364-day 10.21%. Secondary bond yields rose and the rupee weakened to ~LKR 335.75/336.20 amid renewed Middle-East tensions and higher oil prices.

Brent crude rose 5.3% to $78.10/bbl and WTI gained 5.4% to $74.31 after renewed US–Iran hostilities, triggering a global market sell-off. Major U.S., European and Asian indices fell as investors reassessed geopolitical risks to energy supplies.

Heads of the IEA, IMF, World Bank and WTO said the war in the Middle East is straining energy, trade and food security and pledged coordinated support and readiness to act. They noted fuel and fertilizer prices have fallen since June but uncertainty and transit strains persist.

Asian shares rose as semiconductor stocks rebounded while Brent crude jumped to about $78.65/bbl after renewed Gulf hostilities, pushing up global bond yields and increasing markets' bets on further Fed rate hikes.

Brent crude rose about 2% to $75.60/bbl and 10-year U.S. Treasury yields climbed to ~4.565% as renewed Middle East fighting and U.S. moves on Iranian oil raised supply and inflation risks. Equities saw renewed volatility and the AI rally lost momentum after volatile semiconductor results.

Foreign investors bought a net US$3.0mn of Sri Lanka government securities in the week ended July 2 as the rupee recovered to about 330 per USD; YTD net outflows remain around US$13.7mn amid recent currency volatility and rising inflation following fuel price moves and a May rate hike.

Asian stocks drifted lower despite Samsung Electronics forecasting a 19-fold jump in Q2 operating profit, as the yen hovered near 40-year lows, oil prices rose modestly and U.S. yields inched up amid geopolitical and Fed policy uncertainty.

Frontier Research said easing Eurozone inflation and lower oil prices could narrow Sri Lanka's fuel import bill, ease inflationary pressures and reduce depreciation pressure on the rupee. It notes Eurozone headline inflation fell to 2.8% in June and markets expect the ECB to keep rates on hold, though risks from the Middle East and food prices remain.

L B Finance PLC (LFIN.N0000) topped K Seeds Investments' Category 1 ranking of finance companies for Q4 FY25/26 (Jan–Mar 2026), scoring highest across ten equally weighted KPIs. The firm achieved this position despite late-quarter oil-driven fuel-price shocks and rising inflation that pressured peers' margins and loan repayment capacity.

HayWind One (Hayleys Fentons), part of Hayleys PLC, has received all ten turbines for the 50MW Mannar Wind Farm, moving the project into peak construction and installation with energisation targeted by December 2026. Once operational it will add 50MW to the grid and is projected to save ~LKR 100 billion in imported fuel costs over 20 years.

Asian shares eased as investors awaited a key AI earnings season and oil slipped after OPEC+ raised output targets; softer U.S. payrolls and lower energy costs cut the chance of an imminent Fed hike. Futures imply about a 78% probability of no rate change at the July 29 meeting.

SLAM Power Solutions and Ceyring commissioned Sri Lanka's first industrial-scale BESS integrated with solar at Ceyring's Horana factory — a 125 kW / 241 kWh BSLBATT system paired with an existing 100 kW rooftop PV. The installation is designed for peak shaving, grid-failure backup and smoothing solar output for industry.

Sri Lanka's Central Bank bought a net US$70.5mn in June (US$96.3mn purchases, US$25.8mn sales) as the rupee mostly stabilized. The bank has net bought US$556.4mn in H1 2026 to rebuild reserves to meet IMF targets and ahead of sovereign bond repayments from April 2028.

LAUGFS Gas PLC cut its 12.5 kg domestic LP gas cylinder price by Rs.1,280 to Rs.4,965 (5 kg down Rs.512 to Rs.1,988). Litro Gas Lanka also reduced domestic LP gas prices (12.5 kg down Rs.300 to Rs.4,465), citing lower international LP gas prices and promising uninterrupted supply.

Asian stocks rose (MSCI Asia-Pacific ex-Japan up ~1.3%) after a softer-than-expected US jobs report reduced near-term Fed rate-hike odds and regional PMIs showed economic expansion in June.

Oil prices rose slightly ahead of the U.S. long weekend as U.S.-Iran peace efforts held; Brent was $72.10/bbl and WTI $68.83. Reopening of the Strait of Hormuz, higher Kuwaiti output (1.65m bpd in June) and Saudi supertanker movements boosted supply flows.

CBSL expects inflation to remain around 6.8% in the coming months but, aided by lower global oil prices and if expectations remain contained, sees no immediate need for another policy rate hike. The central bank raised the OPR by 100bps in late May and says tightening is already transmitting through higher market interest rates and some reductions in domestic energy prices have been observed.

Oil prices fell about 1% for a third straight day after the US and Iran made progress in indirect talks in Doha; Brent was $70.78/bbl and WTI $67.74/bbl. UBS cut its Brent forecasts and sources said OPEC+ may raise output targets, adding downward pressure on prices.

The World Bank approved $150m in financing (REGROW DPO) to support Sri Lanka's reform agenda to boost investment, competitiveness, high-value exports and jobs. The first of three operations focuses on reducing trade barriers, improving the investment climate, strengthening the financial sector and power competitiveness.

Government launches national El Niño response, directing ministries to submit contingency plans within two weeks after a 63% assessed probability of a strong El Niño. Plans must cover food, water and energy contingencies and official updates will be issued only by the Department of Meteorology.

Sri Lanka's monthly oil import bill rose 112% year-on-year to US$536 million in May, driven by higher oil prices and volumes, though it fell 39.5% from April's US$886 million.

Sri Lanka's current account recorded a US$194 million deficit in May 2026, the second consecutive monthly deficit and leaving a US$97 million deficit for January–May. The trade gap widened to US$4.7bn (Jan–May), fuel import spending rose 112% YoY in May, tourist earnings fell 5.1% YoY in May, remittances rose 26% YTD, reserves were US$6.9bn and the rupee was down 7.9% YTD.

The World Bank approved US$150 million for the REGROW DPO to support Sri Lanka's reform agenda focused on boosting investment, competitiveness and jobs. The operation backs reforms to reduce trade barriers, improve the investment climate, strengthen the financial sector and enhance power sector competitiveness to lower energy costs.