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The Colombo Bourse made healthy progress in a rather short week despite it being the traditional new-year holiday season. The ASPI and MPI moved up by 2.4 points and 5.7 points on Tuesday amidst a dull turnover of Rs. 16.3 million with 186 trades.

However on Thursday indices made rapid gainssurpassing the psychological barrier at 800 to close the week at 813.6 on ASPI and 1378.5 on MPI. Week-on-week (April 11 to April 18) ASPI gained 20.3 points while the MPI gained 27.1. Meanwhile, the turnover levels too improved considerably recording a turnover of Rs. 144.2 million helped by a few big trades in HNB, JKH, NDB and Lanka Ceramics.

This brought the total turnover for the week to Rs. 166.2 million with a daily average of Rs. 83.1 million. Foreign activity remained quiet during the shortened week recording a net outflow of Rs. 11.6 million. JKH, Lanka Ceramics, NDB, NTB and HNB.

Point of View:

Looking at the market performance during the past few months, Thursday's closing at 813.6 is the highest since January 24, 2003 when the ASPI reached 813.2. Meanwhile, the market reached its highest point to date on January 14, 2003 at 843.9. However, the war in Iraq and domestic political uncertainty have weighed down the market, which reached the lowest to date on March 12, 2003 at 697.7 with the war intensifying in the Gulf. Nevertheless, stocks started rallying since the latter part of March in anticipation of a quick victory to the US led forces.

Security will remain a concern

Looking at the outlook for the Colombo bourse from the current juncture, barring possibilities of some catastrophic events in Iraq, it seems to be out of the picture.

Meanwhile, the US has loosened its domestic security by reducing the state of alert from orange to yellow in all areas except New York. Nevertheless, in our view lingering security concerns would continue to be a major downward pull on the global economy, which in turn will affect international trade, raise insurance costs and decrease investor confidence.

Donor conference - A success

Markets reacted positively on Thursday to the donor meeting held in Washington DC on Monday. This meeting, which was aimed at setting the stage for the bigger donor conference set to begin in Tokyo on June, was attended by over 30 governments and international financial institutions. These discussions took place amid controversy, as the LTTE was not invited to participate.

Global economic slowdown

On the other hand looking at the economic impact of the "short war" in the Gulf the IMF has already revised down GDP growth forecasts for the US economy from 2.6% to 2.2% while they also expect global growth to remain "tepid", with normal expansion resuming only in the first half 2004.

Furthermore, ING has also slashed its GDP forecasts for East Asia due to the outbreak of SARS (Severe Acute Respiratory Syndrome) for 2003 from 5.7% to 5.3%. Thus, these factors would have an indirect impact on the domesticeconomy, despite the positive outlook. We expect investors to get back to the market on Tuesday and improve liquidity.

HNB Stockbrokers

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