Financial Times

Investors favour presidential poll, not general election
The stock market shot up last Friday on news of the Supreme Court ruling that the presidential poll must be held this year with brokers saying the decision removes the uncertainty that had kept trading sluggish in recent weeks and augurs well for the future.

But they said investors would not be favourably inclined towards a snap parliamentary poll that has been rumoured as it would disrupt economic activity. “Everything is moving up now,” was the slogan of many stock brokers yelling over their phones.

H. K. Piyadasa, a pensioner, who has been trading for the past four months, told The Sunday Times FT that he expects the market to go up even more, because the political uncertainty seems to be over. "The people want a more stable government and the first step towards that is announcing the elections,” he said.

Hasitha Premeratne of HNB Stockbrokers said the Supreme Court ruling will end the uncertainty over the date of the presidential poll. “This will give direction on what will happen. In the next three months uncertainty will continue but the key point is that the uncertain time frame is reduced to three months, not 15 months.”

This was important for investors who would want to know which policy will be applicable for the next six years when making investment decisions. However, Premaratne said, investors would be discouraged if the government were to go for a snap general election.

“The market favours a president election but not a general election,” Premeratne said. “The presidential election was anyway on the cards as the constitution warrants it. But the markets will probably not like an ad hoc poll like a general election.”

Premaratne said there could be a slow down in overall economic activity in the next three months ahead of the poll. “Investors, especially foreign investors, would adopt a wait and see policy,” he said. The stock market would see heavy volatility in the next three months offering investors good trading opportunities.

A stock broker said that the market saw many retailers buying on Friday, because they feel that they will see a significant change in the political front.
“This means that they feel that a UNF government will eventually come into power, which will be investor friendly,” he said.

Shafraz Jabir, research analyst at SC Securities, said the market cheered the news about the presidential poll this year. “Investors feel the chances are the UNP may come back to power and that’s good for the market.”

Although he said the court decision on when the poll should be held had not completely removed the uncertainty, ”at least people know the direction we’re heading.” Jabir also said the market was becoming less sensitive to political developments. “The stock market was more sensitive to political issues earlier but now that’s changing. With the killing of Foreign Minister Lakshman Kadirgamar people thought the market would come down but it was not so.

Investors now feel they should move on.”Dushyanth Wijayasingha of Asia Capital also said the decision to hold the presidential poll this year will remove uncertainty that was prevailing in the economy and the stock market.
“Once the election is over with, we would be reasonably certain it would be followed by a parliamentary election and we hope there would be a stable government in place by the end of the year,” he said.

“We look to 2006 for stability on the political front which would help the performance of the economy as well as the market and help generate FDI.”
Wijayasingha said that although the run-up to the poll would see a general slow down in economic activity they expect to see a recovery in the first quarter of 2006 with a stable government in place. Laurence David, a stock broker at Ceylinco Stockbrokers said that the market showed immediate positive reaction to the news.

“The uncertainty of whether an election will happen kept the market down for some time, but now the investors see a somewhat clear picture,” he said.
However some stock brokers said that it will settle down at somewhat lower levels and pick up again and run just before the elections.

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