CSE mature enough to withstand political hiccups

by Channa Kasturisinghe

The Colombo Stock Exchange, one of the best performing markets in the world, seems to be reacting strangely to various political developments in the country during the past few weeks.

Having considered comments made by certain stock analysts on the performance of the market one may think that it is ultra-sensitive to some political issues in particular.

The market as expected by everyone reacted positively on Friday (August 26) when the Supreme Court gave its ruling determining the year in which the next Presidential Election will be held.

Investors reacted positively as the Court ruling put an end to the uncertainty which prevailed with regard to this issue of national importance. The ASPI and MPI moved up by 34 points and 68 points while the market capitalisation rose from Rs. 649 million to 659 million.

On the next trading day August 29 the market dipped considerably with the ASPI and MPI moving down by 7.6 and 0.8 per cent. Market capitalisation also dipped to Rs. 657 million. Most analysts told the Daily News that it was natural that investors were keen on profit taking which caused the market to dip. However, some stockbrokers were quick to find a political reason for Monday's market performance.

They said the market dipped as the news came that the Janatha Vimukthi Peremuna (JVP) has decided to support Prime Minister Mahinda Rajapakse, the People's Alliance candidate for the Presidential Election this year.

When the Daily News asked a stock analyst about this strange phenomenon he said that he thought the investor community was mature enough not to get panicked over such an issue.

"The JVP's stand on this issue had been voiced even before the Supreme Court ruling came. It was expected that the most likely candidate to get the JVP support was Premier Rajapakse. Apart from that they have only offered conditional support. Therefore, I do not think the investors took this issue into consideration on Monday," Angelo Ranasinghe of Bartleet Mallory Stockbrockers said.

He said similar comments were made by some analysts just before the United People's Freedom Alliance came to power and they predicted that the market would crash but what happened was the complete opposite.

"I think there is a lot of manipulation going on out there. Therefore, the investors need not panic. We have a very mature market with a healthy liquidity level. So the investors should be more concerned about performance of the companies and sectors.

For example, the telecommunications sector is performing very well with standing all the negative sentiments.

The performance of the Dialog IPO and its first trading day on the CSE gives us a clear idea about how the investors think. Although they are concerned about the political developments that doesn't mean they should react to them hastily," he said.