Sri Lankan stock market looks up

By Nirupama Subramanian

COLOMBO, OCT. 22. The Sri Lankan economy has never been worse in nearly three decades and faces the possibility of a negative growth this year. But the country's tiny stock exchange is soaring and is the best- performing in Asia post-September 11. This is attributed to the anticipated change of government in the December 5 general elections.

The Colombo Stock Exchange closed 14.78 points higher today at 488.38 on the All Share Index, the highest in two years. ``Investors are moving in with the expectation that if the United National Party (UNP) forms the government, the economy will pick up,'' said Mr. Naren Godamune, vice-president of DFCC stockbrokers.

The market was moving mainly on the sentiment generated by recent political developments and had little connection with the current state of the economy, Mr. Godamune said.

At the root of it is the feeling in the business community that the UNP, which ruled from 1977 to 1994, is more market-friendly and would be a better administrator than the People's Alliance Government.

The Central Bank said recently that the growth rate in the first half of 2001 was 0.9 per cent, which made the projected growth of 4.5 per cent for the year look remote.

As if the consequences of the LTTE attack on the international airport in July on travel and tourism, and the sharp hike in freight insurance rates were not bad enough, the September 11 attacks in the U.S. put paid to any recovery plans being conceptualised.

The business community believes that a UNP government may be better equipped to sort out the mess, though, given the state of the world economy, the belief might be a bubble waiting to burst.

Some would be happy just to see a stable government, whatever the party. ``The PA or the UNP, what people are looking for is a stronger showing by one or the other,'' said Mr. Chintaka Ranasinghe, head of research at John Keells Stockbrokers.

The administration almost broke down after an unstable PA-led coalition formed the government after the 2000 elections.

Such was the desperation amongst businessmen that some even welcomed the PA deal with the anti-free market Janatha Vimukthi Peramuna (JVP) as a development that would bring political stability and therefore, some improvement in the bleak economic outlook.

The activity at the Colombo Stock Exchange, which was trading at a near seven-year low till the first week of October, picked up as senior members of the Government walked out and joined the UNP, prompting the Sri Lankan President, Ms. Chandrika Kumaratunga, to dissolve the Parliament and call fresh elections.

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Section  : International
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