Stockmarkets – War? No need to worry

The Colombo stock market performance this year will be co-related to the trials and tribulations of the country’s security situation, according to some industry stakeholders, but others feel there is no need to worry.

“This year the future of the stock market will broadly reflect the country’s ground situation. We will not be able to expect much from the market this year,” Rajive Dissanayake, Manager Research at HNB Stockbrokers (Pvt) Ltd, said.

He noted that in the short term, the stock market will not have a significant run unless something ‘noteworthy’ does happen. “There will be short term trading, but people who want a faster return or a return within a year may put their money somewhere else where the interest rates are high, such as the fixed income securities,” he pointed out.

Dissanayake said the tourism sector will be the most affected, but other sectors will also be affected due to the unhealthily situation in the country. According to another stock broker, there will be short term security concerns, but thereafter the stock market will have the ‘best ever’ performance. “Companies will experience lower profits this quarter, but the year end earnings should show growth, because they will have an over six-month boom period by the end of the year. This is because there are strong indications that the war will be over by April and that there will be a solution to the lagging problem. So companies are aware that this quarter is just a waiting period,” he said.

Ashok Pathirage, Chairman Softlogic Holdings (Pvt) Ltd, noted that the stock market performance will depend on the country’s ground situation together with how the other regional markets will fare. “The world markets are crashing and the country’s military situation is escalating. All this will affect the market’s performance,” he noted. “It will not be easy for companies this year and they will have to struggle with the interest cost,” he added. A stock market analyst noted that the overriding factor which will affect the stock market will be the northeast situation. “When there is a potential overhang such as bomb threats with the escalating violence in the northeast that will make people decide against investing in the stock market,” he said.

He pointed out that rising interest rates will negatively affect companies’ growth. “The higher the companies gear will see it negatively affect on their profits,” he said. However some corporate leaders are very positive about the future. “We have seen all the companies coming up with higher profits.

I feel that whatever the ground situation in the country the stock market will hold its own,” Rajan Brito, Deputy Chairman, Aitken Spence Holdings said.

Kapila Jayawardena, CEO LOLC echoed his comments saying, “Sri Lanka is a very resilient country. We have been through worse times. Even if there is s temporary dip in the market, it will be bullish in the medium to longer term.” He noted that local businesses should be more positive. “There is no need to worry too much.”