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Strong financial results to drive stock market upwards

MARKET: Investors should focus more on positive financial results of leading companies when making investment decisions rather than being distracted by political developments, stock analysts said.

The Colombo stock market which rewrote its record books recently with the benchmark All Share Price Index (ASPI), surpassing the 3,000 level for the first time in history is bound to set more records this year. Its market capitalization is expected to top Rs.1000 billion mark but analysts said how soon it would happen may depend on the way the investors would react to various political developments.

The ASPI has recorded a growth of over 40 in the year 2006 and it is expected to grow at a higher rate in the current year considering the excellent financial performance of several companies, especially in the telecommunication sector.

The market activity levels improved remarkably last year and the trend has continued this year also with the market recording nearly Rs.800 million average daily turnover. However, analysts said that violent incident such as what took place in the East yesterday should not hamper investor confidence and they should focus more on fundamentals.

Both indices recorded losses yesterday but the turnover remained moderate due to continued investor interest in the telecommunication sector.

Traders said although they expected the market to continue its upward trend yesterday the disturbing news of the LTTE attack targeting a Government Minister and diplomats in the east caused the indices to fall sharply in the morning.

However, the interest in the telecom sector shares checked the downward movement but there was also profit taking which also contributed to the decline of the indices. The All Share Price Index fell by 15.83 points to close at 2,996.49 points and the Milanka Price Index (MPI) lost 12.42 points to close at 4,202.34 points.

Yesterday’s turnover was Rs.548 million. Once again it was Sri Lanka Telecom which contributed to about 25 percent of the turnover with over 3.1 million shares being sold. The counter which rose by about 9 percent on Monday with over seven million shares being traded dropped by 50 cents to close at Rs.41.25.

Some analysts said that if not for yesterday’s incident in the East the counter and the market in general would have experienced an upward movement. The other telecom sector counter Dialog also traded heavily with over 1.3 million shares changing hands. The share remained flat at Rs.27.75.

Angelo Ranasinghe of Bartleet Mallory Stock Brokers said that investors need not panic due to incidents such as the yesterday’s attack in the East and the should concentrate more on fundamentals.

“These kind of disturbing incidents can happen once in a while as we have not found a permanent solution to the North East problem. But the investors should also consider that despite the situation almost all the leading companies have recorded excellent financial results last quarter,” Ranasinghe said.

S. Umasudhan of SC Securities said that telecom sector companies such as Sri Lanka Telecom and Dialog are expected to record impressive financial results in the future as the sector is growing at a rapid pace internationally and locally.

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