Stocks up on hopes of political stability with new PM appointment

• ASPI up by 4.43% and S&P SL20 up by 5.22%
• Stakeholders say market view appointment of new PM positively
• Says Wickremesinghe’s return increases hope for IMF-backed recovery programme and support from multilateral agencies and friendly nations for bridging finance

The Colombo bourse bounced back yesterday strongly on the back of renewed optimism amid prospects for political stability in the country with the appointment of United National Party Leader Ranil Wickremesinghe as the new Prime Minister.

The All Share Price Index (ASPI) was up by 4.43 percent or 343.79 points to close at 8,098.41 while more liquid S&P Sri Lanka 20 Index also gained 5.22 percent or 132.14 points at yesterday’s market closure.

Commenting on the market sentiment, Capital Alliance Managing Director Global Markets and Investment Banking Deshan Pushparajah said the market has viewed the appointment of Wickremesinghe positively with renewed hopes of political stability although there are still certain challenges to be overcome.

Further, he noted that Wickremesinghe’s return to the Premier post has also increased hopes for faster economic recovery led by an IMF-backed debt restructuring exercise as well as the country’s chances of securing bridge financing from multilateral agencies and friendly nations.

Meanwhile, the market turnover was recorded at Rs.2.18 billion at yesterday’s market closure. Foreigners recorded a net inflow of Rs.9.2 million while their participation declined to 2.3 percent of the turnover.

On a weekly basis, the ASPI gained 670.93 points or 9.03 percent over three sessions this week while the S&P SL20 gained 261.10 points or 10.87 percent.  So far during the month of May, both ASPI and S&P SL20 indices were up by over 6 percent following sharp fall in April.

With the substantial increase in Treasury bill and bond yields recently, many investment analysts expect volatility in equity performances with no notable recovery.

Further, corporate earnings are also expected to come under severe pressure clouded by economic crisis and anticipated tax increases.