The Colombo stockmarket indices is seen rising to about 3,000 points in the medium term on the back of an end to the conflict and hopes for sustainable development, analysts said.
Charitha Gunasekera, Head of Research Lanka Orix Securities says that following the end of the two JVP insurgencies and the introduction of the 2002 ceasefire agreement with the LTTE the market boomed but this was only on the hope for peace. “As it is, it is evident that everytime there was hope for peace the market reacted positively. With the eradication of the LTTE, the market started reacting to it exceptionally. However this time the circumstances are different when compared to the above events. This time there is sustainable peace in the country, and the foreign investors seems to be more focused on emerging markets with signs of recovery from the world recession becoming evident,” he explained.
He said that in the year to date, the All Share Index (ASI) gained 47% with the index increasing 707 basis points to close at 2210 by end of Thursday’s trading. “In January 2009 the Treasury bill rate had declined by around 5%, and it is expected to come down to a single digit level.”
Sri Lanka is in the forefront in emerging markets since now there is reduced country risk, and major scale development projects are underway for the North and East creating many business opportunities, he said, adding that the indices, factoring this situation, will increase in a sustained manner during the next few months.
A broker said that Central Bank upgrading their economic forecast for 2009 will attract more foreign investors. “With the extermination of the LTTE leader, the ASI (since May 19) gained 300 basis points as of Thursday,” he added.
Furthermore, he noted that with low inflation, and the government easing its monetary policy (leading to falling interest rates), investor attitude and corporate results are also expected to improve and thus fuel market growth.
“The positive momentum could be expected to persist in the next few days, though profit-taking could bring the prices down somewhat. The confirmation of political stability in the country should continue to draw investors to the equity market,” he added.
Thursday also saw investors being attracted to the equity market with the positive results for Sri Lanka from the UN Human Rights Council session, with market turnover comfortably exceeding Rs 1 billion. |
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