Stock market welcomes resignation of Cabraal

By Nishel Fernando
The Colombo bourse yesterday positively responded to the resignation of Central Bank (CB) Governor Ajith Nivard Cabraal and unconfirmed reports over the appointment of former CB Governor Dr. Indrajit Coomaraswamy to the three-member advisory committee to lead negotiations with the International Monetary Fund (IMF) on behalf of the country.

“We saw a bit of a bottoming out and a recovery in the market. With the resignation of Central Bank Governor Ajith Nivard Cabraal, we saw some recovery in the market, driven by the positivity, as it is likely to allow the CB to make rectifying measures, allowing a proper float of the currency and the much-needed hike in policy interest in line with the proposed economic stabilisation programme under the IMF. On these speculations, the market started to move back again and enter into an oversold territory as well,” Head of First Capital Research (FCR) Dimantha Mathew told Mirror Business.

During early trade, the All Share Price Index (ASPI) was up by 150 points, recovering from a sharp fall of 7.5 percent on Friday. However, the ASPI was down by 2.6 percent to 8,244.55 points at yesterday’s market closure, driven by volatility and selling pressure.

High-net-worth and institutional investor participation remained subdued for the day.

Market was halted for 30 minutes twice, as the more liquid index S&P SL20 hit 5 percent and 7.5 percent circuit breakers. At the market closure, S&P SL20 was down by 5.16 percent. The market turnover was Rs.1.96 billion yesterday, up from Rs.1.25 billion on Friday.

“That’s a significant improvement over the 7.5 percent decline at the start of the day,” Mathew noted.

With former central banker Dr. P. Nandalal Weerasinghe, who served as Senior Deputy Governor under Dr. Coomaraswamy, tipped to be appointed as the next CB Governor, Mathew noted that investor sentiment has turned positive.

“We will have proper personals to negotiate with the IMF in place. The directions and expectations are aligned,” he added.

However, he cited the continuing social unrest as a concern with the president and prime minister continuing to hold onto power.