Panic selling by locals but foreigners optimistic

The indices moved down drastically yesterday continuing the trend started on the election day. The All Share Price Index (ASPI) closed at 2159.91, which was 169.01 points lower compared to the previous days closing. The Milanka Price Index (MPI) closed the day at 2780.25, registering a fall of 242.58 points.

The total market capitalisation which dropped to Rs. 705 billion on Friday further dropped to Rs. 654.2 billion at the close of trading yesterday.

Angelo Ranasinghe of the Bartleet Mallory Stockbrokers said it was the locals who contributed to the market to go down while the foreigners were on the buying side. The total equity turnover was Rs. 607.3 million for the day. The net foreign inflows registered Rs 99.6 million with foreign purchases recording Rs. 142.7 million and foreign sales Rs. 43.1 million during the course of the day.

"We saw a lot of panic selling by the locals when the foreigners seemed not to be perturbed by the political developments. This negative attitude from the locals is somewhat unrealistic. We have not yet seen any signal from the new President or the Government which could cause panic among the investors," he said.

He said although a 14 percent drop in just two days was too much the market wouldn't continue in the same manner as a technical correction is inevitable.

"The fundamentals are still strong. Panic selling will ease off soon and the market will stabilise. As long as the Government maintained the interest rates at single digit level and ensure a growth rate from 5 to 6 percent the investors need not be pessimistic. Of course, the peace process should continue. It is the most important factor," Ranasinghe said.

Some analysts said that state institutions could help reverse the downward trend by being actively involved in the market.