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. |