CSE: Foreign selling but local sentiment high
Share prices at the Colombo Stock Exchange (CSE) will react next week according to how Sri Lanka’s political game is played.
Analysts said retail trader sentiments will solely centre on which political party will command ‘staying’ power. The CSE saw retailers flocking in this week, buying large to mid cap stocks with former President Mahinda Rajapaksa’s rise as the Premier, while foreigners sold.
Retail trader sentiment is high after years of being in the doldrums despite the CSE dropping on Friday. It’s a breath of fresh air, said one stockbroker to the Business Times. He was concerned of what will come after the chaotic politics settles down. Analysts say that foreign investors are now selling more than ever after the unexpected October 26 developments. What is certain though is that foreigners who were selling will further sell mostly due to the global slowdown. Couple this with the unstable political crisis, and foreign exits are hastened.
Analysts said Monday’s Rs.3 billion foreign sales were mainly owing to the current political risk. They say these outflows have been one of the key factors in the devaluation of Sri Lanka’s currency and the declining foreign reserves. “In the next few days we will see more foreign selling,” a stockbroker told the Business Times.
On Thursday at the start of the month, CSE rose sharply by 2.70 per cent and crossed the 6,000 points. Analysts noted that frontier funds which invest in markets like Sri Lanka are also keeping away as the political risks are weighing them down. For an example, Thursday saw net foreign selling in HNB, JKH, Access and Dialog.
Many of the emerging markets have been hit lately by external shocks, as outflows from emerging markets have triggered their currencies and capital markets to decline.