Financial Times

Stockbrokers say markets show hope despite war crisis
Despite fears that the market will face another slump such as the one experienced in 1994 owing to the conflict, stockbrokers say the present fall is a temporary development with hopes of the bourse bouncing back and the return of investor Raj Rajaratnam reinforcing this feeling.

“This is absolutely a temporary situation,” Tushan Wickramasinghe, Managing Director, Lanka Orix Securities Company said. But he added that the peace process, which is closely tied to the stock market’s performance, has to be resolved soon and both parties are under pressure internationally to start peace negotiations. “There has to be a negotiation to the ethnic issue and there is considerable international pressure for both sides to come to a settlement. When there is an indication to a peace negotiation, the investor sentiments will pick up and the market will perform,” he said.

On Thursday, Raj Rajaratnam’s Galleon Fund bought 0.75 percent stake in premier blue chip JKH totalling three million shares at Rs. 118 each, which analysts said was a sign of investor confidence. “This move by Rajaratnam is closely watched by other investors and it is a confidence booster, which they will pick up,” an analyst said. Immediately after presidential polls last year, Rajaratnam sold out of Hemas, Lanka IOC and recently Sri Lanka Telecom.

Manjula Kumarasinghe, Head of Corporate and High Networth Markets, Asha Phillip Securities Ltd said in the present volatile situation, there is an opportunity for trading activity. “Chaos, violence and ambiguity are part and parcel of the markets and we have to learn to live with them. I feel that within this volatile situation, there is an opportunity for trading,” he said.

Another stock analyst said the present situation is much better compared to 1994, because ‘there is no actual war situation’. “Both parties have indicated their desire for peace and are in a negotiation mode, but this was not the case in 1994. So there is still hope for the stock market and the negotiation sentiments of both the government and the LTTE is at a much better level,” he said.

Magu Murugesu, CEO Lanka Securities said that if the ‘slump’ situation continues in the market, the profitability of the firms and the market’s volume will decline, but it will be a temporary setback. “It will not be as bad as the 1994 era and the market will bounce back,” he said.

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