Business Times

Market on the upward trend as traders anticipate price band lift

By Duruthu Edirimuni Chandrasekera

Colombo’s share market is likely to continue to move up rapidly in the next few weeks as traders take up strategic positions in anticipation of changes in the price bands, according to stock analysts.
They say that amongst the top picks for the market to move up in the medium term are seemingly two thirds majority for the government, new capital market regulatory framework and some government institutions buying into the market. Milinda Ratnayake, Analyst SMB Securities said that he expects the market to move up as the investors have begun their hunt for fundamentally attractive counters consequent to the price band rule by the regulators.

“The Colombo bourse is currently experiencing a record breaking run on the back of higher strategic investments by local high net worth investors and strong retail participation,” he said. An analyst said that the continuous decrease in interest rates and the rapidly rising awareness of the Colombo share market will result in more money flowing into the market.

“It’s a case of too much money chasing too few opportunities right now and it’s hard to see what the trigger would be for the market to be on an upward drive. It could be anything out of the blue such as another change in regulation (price bands) perhaps. But on the economic front all news will be mostly positive for this month and for the rest of the year,” he said.

However what would people buy remains a question because almost everything as many analysts say are overvalued. Some argue saying that price bands are immaterial if you bet on sound stocks. “If you have bought into the right stocks, regulatory framework is irrelevant. For instance some of India’s price bands are at 5%, (still they’re performing well),” a second analyst said. She noted that as better corporate earnings numbers coupled with strong macro- economic fundamentals will definitely help to sustain the current growth momentum and maintain the upsurge.

“If the next budget is in line with the medium term the strategies stated in the 2010 budget, the market is expected to strongly rally in the coming weeks,” she added.

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