Financial Times

ASPI to surpass 2,100-mark in 2006, analyst says
The All Share Price Index of Colombo Stock Exchange will rise well beyond 2100 points in one year's time, depending on the current level of performance and the continued peace effort, an investment analyst has forecast.

Hasitha Premaratne, head of research at the HNB Stocks Brokers Limited, made this observation while addressing a forum of fund managers at a seminar organized by the company recently."We remain bullish on conglomerates, construction, manufacturing, power and energy and health care sectors," he said.

"While the market is expected to remain volatile in the short term, we project strong valuations in the medium to long term." He said his forecast was based on HNB's risk matrix, which analyses the impact of the peace process, macro-economic environment, global oil prices and market conditions on investment decisions of local inventors.

"We feel that an appropriate level of the market price earning ratio is 11.1 based on an 18.5 percent growth in earnings," Premaratne said. "Our target for ASPI for end-2005 is 1835.3 points, an upside of 10 percent from the current levels. If this scenario continues into 2006, corporate earnings are expected to rise by 15 percent, pushing the ASPI to 2110.6 points in 2006."

Commenting on the macro economic performance of the country, he said: "The Sri Lankan economy has remained resilient despite several set backs, and is heavily relying on the peace dividend to uplift its growth momentum.

"We believe that it could weather the Boxing Day tsunami devastation and recuperate strongly to post steady growth. Amid the continuing 'no-war, no-peace' situation and easing of global oil prices the Colombo Stock Exchange has offered a compound return of 34.3 percent over the last three years, and was among the top three best performing equity markets in the world."

The country faced hardships in mid-2004 due to rising global oil prices, and more lately by an unexpected tidal wave that affected southern and eastern coasts of the country. "However, with the mammoth aid flows expected and global oil prices easing off, we believe that it is the right time to capitalize (on the disaster) and take the economy to new heights by turning disasters into opportunities," he noted.

He also stressed the importance of the continued peace efforts for the better performance of the market and economy. "Peace still holds the key," he said. "We place a 73 percent probability on the continuity of the peace process, with strong international backing forcing the LTTE and the government to remain at the negotiating table."

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