Financial Times

Aid, receding war threat seen boosting bourse
By Duruthu Edirimuni
New pledges of foreign aid that is strengthening the rupee against the dollar, talk of donors giving debt relief, and the receding threat of renewed hostilities are likely to entice more foreign investors, giving a further boost to the Colombo bourse, despite the tsunami tragedy, stock market analysts said.

"This will reinforce the foreign investor confidence in the market and drive it up further," Dimuthu Abeyesekera, CEO, Asha Phillip Securities Ltd., said. Asanga Seneviratne, Managing Director, Asia Securities said the market will see earnings of the services sector rising considerably.

"The Hemas Group, Lanka Indian Oil Company (LIOC), ACL Cables will perform very well in the coming year," he said. He added that hotel groups such as the Taj and Aitken Spence will have good earnings, while John Keells Holdings, because of its diversification, will also do well during the next financial year.

He said hotels in the interior of the country such as Kandalama, Tea Factory, Citadel, Culture Club and the city hotels such as Trans Asia and Asian Hotels will be preferred in the immediate future and will record higher occupancies and returns than before.

Since the funds pledged by donors will be channeled through development banks, many stockbrokers said that this sector will do very well during the next financial year.

Analysts said the total loan portfolio of the banking sector has a fairly small coverage to the tourism and fisheries sectors, graded as high-risk sectors.

However, the existing personal and corporate loans of people and businesses hit by the tsunami will not be recoverable within the stipulated times, which will hit the banks' bottom lines.

Seneviratne said the finance sector and the insurance company earnings will be badly affected. He said there will be about a 10-20 percent upward trend in the market during the next few months and there will not be many sellers. "Many people will not be in a hurry to exit stocks because they anticipate a better time to do so," he added.

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