Strong institutional support key to market recovery - Analysts

Channa Kasturisinghe and Hiran Senewiratne

BOURSE: The activity levels of the stock market remained at a modest level for the second consecutive day of the week as most investors continued to take a `wait and see approach'.

Although, some analysts earlier expected a possible EU ban on the LTTE would improve the market performance both indices declined yesterday with the turnover remaining below Rs. 100 million.

"Investors are probably expecting escalation of violence on the part of the LTTE following the EU ban on the organisation, Angelo Ranasinghe of Bartleet Mallory Stock Brokers said.

"We have already seen reports that the Tigers had killed 12 construction workers in the eastern province immediately following the EU decision. Investors may be expecting such incidents to continue. Therefore, we expect the market to be volatile during the week," he said.

Last week the market fell for the third consecutive week and the activity levels were sluggish. Although, the market started this week on a positive note the All Share Price Index fell by 4.57 points and the Milanka Price Index fell by 11 points.

The turnover was a mere Rs. 94 million and the market capitalization further dipping to Rs. 676 million.

Meanwhile, some analysts expressed concern over the lack of institutional support to improve the market performance.

Asian Stockbrokers' Kavin Kodituwakku said that institutional funds such as EPF and FTF were inactive during the last two months.

Senior Investment Advisor Susil Feranando said that basically the market activity is relatively low during the last two to three months and all investors including retail, institutional and foreign are adopting a await and see approach due to the uncertainty in the country.

Another analyst said that EPF and ETF funds should make use of this opportunity and invest in fundamentally strong sectors such as telecommunication, food and beverages, plantation and hotels. "We should take a clue from what happened in India recently. The market almost crashed but due to strong institutional support it recovered in no time.

The encouragement given by the Indian finance minister to these investors also played a part in this market recovery," he said.

He said it was the retailers and foreigners who were active since the market started its negative trend following the LTTE's recent ceasefire violations.

"But the retailers capacity is very limited. For a full market recovery institutional support is essential. This is the time they should aggressively invest in the market," he said.

424,800 Dialog shares traded yesterday with the share price remaining at Rs. 21.50. The Banking stocks recorded losses yesterday falling 62.36 points.

Commercial Bank, fell 1.25 rupees or 0.8 percent to 152.00 rupees and the Hatton National Bank declined to 110 rupees.