Financial Times

Colombo stocks seen bouncing back
By Duruthu Edirimuni
Despite the panic selling in the stock market on Friday after the unanticipated UPFA victory, causing the All Share index to fall by 171.2 points, brokers expect the market to bounce back and consolidate in coming weeks.

“We don’t expect the market to drop drastically. It will have to rebound soon and we have already seen considerable fresh buying interest,” said broker Milanka Induruwage.

Stock analysts said that with the record breaking 2551.4 all time high in the ASPI and 2374 in Milanka last Wednesday, just before the Presidential polls, the entire stock market was optimistic of a UNP win.

“Investors panicked, because the opposite happened. Therefore the downward trend is one that was to be expected, but it will consolidate within a few days,” a stock analyst said. He said UNP parliamentarian Milinda Moragoda’s comments on the LTTE had also made a negative impact in the stock market last Friday.

Many investors however are holding onto their stocks in anticipation of a decision regarding the Cabinet formation by the new president, Mahinda Rajapakse.

J.W. Fernando, an investor who spoke to The Sunday Times FT at the bourse, said that the Colombo stock market will show resilience within a few weeks. “I am confident that the buyers will return,” he said.

Investors were also wary of who would be the new Prime Minister. Analysts said there was concern that Rajapakse may appoint a nominee from among the coalition’s extremist elements.

Dushyanth Sivanathan, an investor for the past three years said that the market will be in motion depending on the structure of the Cabinet. “The short term impact in the market depends on Rajapakse?s moves regarding the Cabinet,” he said. Some were taking a wait-and-see approach.

However, some stockbrokers said that contrary to popular belief the UPFA will do a good job at the stock market. “Many pessimists think that the country will revert to war and the stock market growth trend will be stalled, but it is not the case. The country has ‘tasted’ peace for sometime now and the progressive forces together with the international community will make sure that it continues,” said Niyaz Aboobucker, Senior Manager Trading, Asia Securities.

Reshan Kurukulasuriya, Assistant Vice President, DFCC Stockbrokers said the stock market will revive in the short term depending on Rajapakse outlining his economic policies.

Jayantha Perera, Head of Capital Markets, Merchant Bank said that Rajapakse?s plans to appoint a Premier and decisions regarding the peace process will have a major short and long term impact in the stock market. “Initially business sentiment will be low, because everyone expected Ranil Wickremasinghe, who is popular as a pro-business candidate, to win,” he said.

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