Stock gains not reflecting economic crisis
Sri Lanka’s crisis economy is not reflected in the stock market with the Colombo Stock Exchange (CSE) posting gains and high turnover.
Analysts say that the International Monetary Fund (IMF) staff level agreement signed late last month has improved the sentiments of traders. They say that the ensuing debt negotiations stipulated in the IMF agreement may see Sri Lanka going for local debt haircuts, the agreement itself has shed some light on positivity. They also say that the staff level agreement will also fetch some bridge financing for the country for the next few months.
A stockbroker said that shares that were trading at a discount value are now revaluing. “People are always overreacting to this kind of situation. We see some of that now,” a stockbroker said.
A CEO of a stockbroking firm agreed, noting that now it is 25 per cent better than the June-July sentiment. “There seem to be some silver lining with investors investing more than the past few months. There is a lot of trading activity as well.” He added that the impending haircut in local banks may also see investors putting money in equities.
The growing number of online traders has also contributed to high turnover in the stock market.
Analysts also pointed out that in the midst of the worst economic crisis the country has seen, Sri Lankans have moved from a savings culture to a spending culture, which has resulted in lots of consumerism. They also say that listed companies have shown remarkable progress over the past few quarters. “This has interested not only local investors but also foreign. There is some attention in Sri Lanka right now. Although very slowly, we are getting inquiries from foreigners,” an analyst said.
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