By: Staff Writer
September 24, Colombo (LNW): The Colombo Stock Exchange (CSE) ended in the green yesterday, reflecting a positive response to the inauguration of Sri Lanka’s new President, Anura Kumara Dissanayake.
The benchmark All Share Price Index (ASPI) initially dropped by over 180 points in the early minutes of trading, triggering concerns of market volatility.
However, the index made a robust recovery throughout the day, closing with a gain of 130 points, or 1.99%, at 11,097. The more liquid S&P SL20 index rose by 1.88%, up 58.43 points to 3,160.63.
Kanishke Mannakkara, CEO of Capital Alliance Holdings Ltd, described the market’s reaction as a sign of confidence in the smooth transfer of leadership.
He emphasised that the continuation of this positive momentum will depend on the new administration’s ability to maintain a stable economic environment.
Mannakkara highlighted that the market appears undervalued, suggesting potential for further gains if the government adheres to its stabilisation and reform agenda.
The current sentiment is bolstered by expectations that President Dissanayake’s administration will maintain the existing Debt Sustainability Analysis framework, a crucial factor in investor confidence.
Any deviation from this expectation, however, could disrupt the optimistic market trend, warned Mannakkara.
Raynal Wickremeratne, Co-Head of Research at Softlogic Stockbrokers, pointed out that the market had already priced in the possibility of a National People’s Power (NPP) victory, explaining the pre-election downturn in the CSE. According to Wickremeratne, the market’s response to the election outcome was not a surprise, as many investors had anticipated an NPP-led government.
Banking stocks were a major contributor to yesterday’s turnover, accounting for 36% of the total market turnover of Rs. 994.3 million.
This sector’s rise followed last week’s announcement of external debt restructuring, which had a positive effect on the banking industry.
Softlogic Stockbrokers noted that banking stocks were trading at a significant 40% discount to the market’s price-to-book value, while generating an average return on equity of around 12%.
Despite the upbeat performance of the stock market, foreign investors remained net sellers, with a net outflow of Rs. 5.2 million recorded.
Additionally, Sri Lanka’s dollar bonds saw a decline in secondary markets, particularly in Singapore, where panic selling was observed.
Bloomberg reported that the country’s bonds maturing in March 2029 fell by 3.1 cents, marking the steepest drop in nearly two years, closing at 50.2 cents on the dollar.
The Colombo bourse’s recovery reflects cautious optimism about Sri Lanka’s political and economic future, but ongoing concerns surrounding debt restructuring and foreign investor sentiment remain critical factors for sustained growth.
