The positive news of the war situation in the north has set renewed interest of high networth individuals (HNWIs) and institutional clients, but their process of ‘getting into’ equities is slow, according to some stock analysts.
“These two groups are closely monitoring the market and slowly getting into equities. But the concern most investors have at the moment is on the government funding side and whether (the pledged) IMF facility would come or not, because interest rates could rise again if government fails to get this facility,” Geeth Balasuriya, Manager Research Acuity Stockbrokers told The Sunday Times FT. He said that some parties are waiting to see how government is going to solve these funding issues before getting into stocks aggressively.
“So at the moment there is a feeling of 'cautious optimism 'mainly among high networths and institutions.”
However Srimal Liyanage, Head of Research Lanka Securities noted that the cessation of the hostilities will not be a surprise for the institutions and this component is already factored into the market valuations. “However this would be different with the foreign funds. The big names in global fund management will hopefully change their outlook on the Colombo Stock Exchange ," he added.
Mr. Balasuriya said that Sri Lanka is set to experience the north and east markets, thereby giving a boost to many industries such as trading and construction with the liberation of these areas, which will see a hike in the indices as much as above the 2,000 level mark. “If we see an end to the hostilities soon and further improvements in the macro economic fundamentals, we could see a re-rating in the market and the index could easily surpass 2000 level. However things will largely depend on how government would address the economic issues after successfully finishing the war,” he added.
Mr. Liyanage also agreed that ending the war will have a positive impact on the market, but if the trend is to sustain the expected development in the economy should take place as soon as the war is over. “The international pressure to minimize hostilities and rumours that the Sri Lankan government will be pushed for a ceasefire at the edge of finishing the war resulted negatively on the market,” he added.
He also noted that the 2,000 mark (all share index) is a high possibility in the short run. Mr. Balasuriya said that initially there might be very high turnover levels but daily turnover levels may average around Rs.250 -300 million but could increase further over the medium term. |
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