The Colombo bourse’s benchmark All Share Price Index (ASPI) is seen reaching the 3,500 level next year from a current 2,500- 2,600 level while the buoyant sentiment has begun in the stock market for investors, according to a financial industry expert.
“If the corporate earnings grow at 15% and the stock market price earnings ratio (PER) grows by 12 times, we can see the ASPI hit 3,500 points next year,” Hasitha Premaratne, Head of Corporate Finance, Brandix told a high profile forum. He was speaking on stock market opportunities at a discussion organized by Sri Lanka Institute of Directors in conjunction with Colombo Stock Exchange (CSE) last week.
He said this year’s ASPI target is 2,860 – if the market PER grows 11 times and there is a corporate earnings growth of 2%. “The end of war has given the CSE a new life and this will gear the economy into a growth mode,” he said.
He said in such a scenario, the bank interest rate reductions should divert investor attention to the CSE.
Mr Premaratne added that the cessation of hostilities has made the country a safer place to do business, while it is also a clear boost to the listed firms to make profits. “Cessation of hostilities has reduced war-related spending, but a permanent political solution is still pending,” he said.
The industry expert said two thirds of the coastal area has opened up, while 27% of the land area has increased after the war.
“So far the North has contributed 2.9% and the East has contributed 4.7% to the gross domestic product (with the war). “Now that the war is over there is room to boost economic growth.” |
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