Financial Times

Colombo stock market indecisive before polls
The run up to the presidential elections will see the stock market adopt an indecisive, wait-and-see approach while the economy would be stretched by rising oil prices, stock market analysts say.

“The wait-and-see attitude is typical election behaviour and this will continue till both parties release their manifestos,” Manjula Kumarasinghe, Head of Corporate and High Net worth Markets, Asha Phillip Securities Ltd, said. He said once a clear policy is outlined by both parties with regard to the economy, the ethnic issue and the development plan and depending on the direction of the voter base, the stock market will react.

Vajira Premawardhana, Executive Director, Lanka Orix Securities Company (Pvt) Ltd, said that the market will remain uncertain till a clear direction is given by both the parties and when there is more information on the election itself.

“The stock market will be indecisive during the next few weeks, because there is a rumour of a general election before the presidential election. Investors will be hesitant, till they get a clear indication on this political decision,” he said.

He said in terms of the volumes and the prices, the stock market has performed well during the last two years, but the volatility is associated with major political decisions such as the elections because, pre and post elections have been linked with violence and destruction. “Many investors are concerned about these incidents affecting businesses and they prefer to be cautious before they make a decision,” he added.

However, some stock analysts said that since both the major parties’ economic policies are the same, the stock market is unlikely to see major swings. “The economic policies of the two parties are very similar, but the business community is divided on the party that manages and executes these policies efficiently. During the last few years, the stock market has been performing well under this government and there is really no worse case scenario regarding the elections in the long run,” one analyst said. He said that the market will be more susceptible to the hike in oil prices.

Deva Ellepola, CEO, HNB Stockbrokers (Pvt) Ltd., said that fuel prices and the conflict situation in the country will affect the stock market in the coming months.

“The financial results that have been coming out are supportive of the stock market indices, but the way forward is the situation in the oil prices and the impact it will have on businesses. Also we have to address the tsunami funds issue and when it will actually come into the country, because this will propel money to circulate in the country, which will be positive on the stock market,” he said.

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