The prospect of peace talks and bold reforms expected in the March budget is likely to boost the stockmarket again once it recovers from the current period of consolidation, analysts said.
"We see the market as having turned the corner," said Dushyanth Wijayasingha, head of research at Asia Capital. After the substantial gains in the last three months, there is bound to be a period of consolidation, he said.
"Markets don't go up in an orderly fashion," he explained. "There would be an initial spurt, then a phase of consolidation which we're now going through. We'll see the market moving up after this period of consolidation, with the combination of radical reforms in the budget and starting of peace talks," he said.
Radhika Jayasundera, assistant vice president of research at DFCC Stockbrokers, said they expect to see more activity by local institutions in the days ahead which should help drive the market up. "Once retail players see indications of large funds coming in - that should support retail buying," she said.
Wijayasingha of Asia Capital said it has been "high-net worth" individuals and retail investors who have been driving the market so far. "Now we need local institutions to come in," he added. "They would be the ones to take a long-term view."
But foreign investors were still very much on the sidelines. "We don't see foreign investors coming in at once," said Jayasundera of DFCC Stockbrokers. "They are probably waiting to see some concrete action (in reviving the economy) when they'll feel confident enough to come back to the market."
Wijayasingha said he sees the Colombo bourse rising to the 800 - 850 levels on the All Share Price Index (ASPI) from the current 600 levels towards the third quarter of the year. "That would coincide with the recovery in the global economy which should help revive our exports," he said.
The surge in share prices in the fourth quarter of last year ending with December's unprecedented bull run saw the Colombo Stock Exchange recording its highest annual growth in seven years.
The ASPI rose 38.7 percent during the year, closing at 621 points, while annual turnover increased by 27 percent to Rs. 14 billion.
Meanwhile, market watchdog, the Securities and Exchange Commission (SEC), is keeping a close eye on share price movements to try to check attempts to manipulate the market during this period of volatility.
The SEC had checked the records of certain trades during last month's bull run following the United National Front victory at the general election but found that they had been mostly retail driven. Market sources said it would be difficult to identify unusual movements because the entire market is volatile.
Consumer confidence is bouncing back after the United National Front government took office, a survey has revealed.
Survey Research Lanka (SRL), a Colombo market research firm, said a survey conducted by the firm on December 29-30 appears to signal a significant reversal in consumer sentiment, which saw falling trends earlier.
SRL's Consumer Pulse was introduced in May 1994 to track consumer sentiment. It said unlike most indexes, this measurement is spread into three indices providing a consumer's present sentiment, future perception and consumer confidence.
Soon after presidential polls in December 1994, the index levels were high but since then the values have fluctuated around a declining trend.
The movement of the three indices over the next few months will reveal whether the current upsurge in confidence is just another 'fluctuation' or whether it is the beginning of another economic boom.
"An increase in consumer confidence would signal an increased willingness to spend, while a decline in confidence suggests that consumers are more inclined to save," SRL said.
Sri Lankan commercial banks are likely to have euro currency notes available for purchase by the public from this week.
The banks are ready to encash euro already available with customers such as tourists and had placed orders with their overseas principals to meet their requirements of the currency, officials said.
"Cash should be available very soon. We're awaiting a shipment," said a Deutsche Bank AG official.
The euro currency became available to the public in the 12 European Union countries that make up the euro zone on January 1.
The move to a single currency in the EU is likely to lead to lower transaction costs, eliminate exchange rate risks and provide easier access and increased sales for Sri Lankan exporters in the member states of the common market.
The EU is one of Sri Lanka's largest trading partners and the second biggest market for garments. Last year, EU countries imported 1.9 billion euros worth of goods from Sri Lanka and exported 1.6 billion worth of products to the island.
By Akhry Ameer
The Japanese partners of Sri Lanka's Dankotuwa Porcelain Ltd (DPL) are threatening to pull out and even discourage other Japanese investors from coming here if a labour dispute at the factory is not quickly resolved.
"The Japanese consortium has told us in no uncertain terms that 'enough is enough' and the company would have to shut down if workers don't abide by the collective agreement," said DPL chairman Sunil Wijesinghe.
The crisis at one of Sri Lanka's best-known ceramic-ware factories broke out in mid-December just as the company launched its widely promoted Tableware show at a Colombo hotel with popular Indian movie star Mandira Bedi in attendance.
Bedi, the star of Indian TV series Shanthi and who is also acting in local drama Damini, has been contracted by DPL to promote its products, here and abroad.
The company, in which controlling shares are owned by a consortium of Japanese companies, has been struggling with a labour dispute since 1993 over bonus and salaries, which worsened last month over demands for a bigger bonus. The Employees Trust Fund has a 19 percent stake in the company.
Wijesinghe said the Japanese partners were disappointed that workers were not respecting the collective agreement they themselves signed. "This is an unfair demand by the unions as they had promised industrial peace after signing a revised collective agreement last year."
He conceded that the workers had been receiving high bonuses as much as eight times their salaries in recent years but that was when the company was performing well.
Last year however, the company was expected to end up in the 'red' with the workers on a go slow while external factors such as the September 11th terrorist attack in the US, high cost of freight and fuel and other factors hit revenues and export markets. DPL also had to face stiff competition in the global market with China and East European countries offering cheaper porcelain. The DPL labour dispute has been an on-off crisis over the years with workers demanding higher and higher monetary incentives. A collective agreement was signed in 1999, which had to be revised in September 2000 after workers revolted.
The employees numbering around 950 are paid some of the best salaries and incentives in the local industry with many other perks and salaries amounting at times to as much as Rs. 11,000 per month, company officials said. The company has offered to pay Rs 2,500 as a bonus but the workers want more.
S. Sarathchandra, president of the branch office of the Nidahas Sevaka Sangamaya (SLNS) union said the current campaign was launched by the Jathika Sevaka Sangamaya (JSS) and his group is supporting the cause.
Asked about the picketing during lunch hours and the go slow, he said that they have stopped these activities since the New Year and agreed to join in the negotiation process. JSS branch president Nilantha Gunawardhana was not available for comment.