Market positive amidst political developments

by Channa Kasturisinghe and Hiran Senewiratne

The stock market yesterday recorded considerable gains ending the downward trend which persisted during the last week and on Monday. The All Share Price Index (ASPI) moved up by 16.99 points to close at 2130.41 while the Milanka Price Index (MPI) also increased by 39.81 points to close at 2815.30. Total turnover for the day was Rs.564.2 million.

Market Capitalisation at the end of trading stood at Rs.645.1 an increase of over Rs. 5 billion compared to the previous day. A total of 14.7 million shares were traded through 3384 trades.

Most analysts predicted that the downward trend would continue due to various political developments which are taking place in the run up to the 2005 presidential elections. However, some analysts told the Daily News that they believe yesterday's performance is an indication of positive performance of the market during the coming days.

Meanwhile, some analysts last week attributed the declining trend of the market to eroding investor confidence due to the Janatha Vimukthi Peramuna joining hands with Prime Minister Mahinda Rajapakse in the forthcoming elections.

They said the market which shot up following the Supreme Court order on August 24 to hold the election this year, started to decline since the JVP announcing the possibility of a coalition on August 26.

However, yesterday's positive market performance came just after the JVP officially announced their decision to support the Prime Minister and President Chandrika Kumaratunga's announcement that she too supported the coalition. There were also unconfirmed reports of further support from other political parties including the Jathika Hela Urumaya to the UPFA presidential candidate.

However, Asha Phillip Securities, Deputy General Manager Upul Priyantha said that the reason for the stock market to go up yesterday was heavy institutional buying especially among Blue Chip companies.

He said that there was heavy trading in many sectors including the telecom sector. John Keells Holdings had heavy international interest, which also helped the indices to gain.

"However, everything is based on the political situation in the country and the stable government is the need of the hour to market to be stable and active. Research Analyst - C T Smith Stock Brokers (Pvt.) Ltd, Eranjan Kulatunga said growth in the market also shared a similar view.

Angelo Ranasinghe of Bartleet Mallory Stockbrokers said the market moved up as a technical correction was inevitable following a declining trend which continued for about five days.

"Yesterday there was some selective buying. There was interest in JKH, Hayleys, Richard Peiris, SLT and Distilleries shares," he said.

Sectors that recorded noteworthy gains during the day were Land & property (4.0%), Investment Trust (1.4%) and Diversified Holdings (1.3%) while Stores & Property (0.8%) and Motors (0.2%) sectors led the sectors that recorded negative growth. Foreign investors were net buyers in the market with purchases of Rs. 58.6 mn against sales of Rs. 53.7 mn.