Stock market rebounds to over 3-month high on hopes of political stability

Reuters: Shares ended higher for a third straight day on Tuesday on hopes of political stability after the prime minister decided to stay in office and reshuffle his cabinet in the wake of a stinging loss in local elections for both parties in the ruling coalition.

The coalition parties held a cabinet meeting on Tuesday and said the island nation’s government plans to continue their tenure.

Prime Minister Ranil Wickremesinghe’s centre-right United National Party (UNP) and President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP) were routed by a party backed by former President Mahinda Rajapaksa in local polls on Feb. 10, plunging the government into a crisis. The Colombo stock index ended 0.19 percent firmer at 6,577.84, hitting their highest close in more than three months. “With signs of stability coming in, investors are re-entering the market. Foreign investors are also returning slowly,” said Dimantha Mathew, head of research, First Capital Holdings. Turnover stood at Rs. 860.2 million ($ 5.54 million), in line with the daily average of Rs. 850 million. Foreign investors bought a net Rs. 72.3 million worth of shares on Tuesday, extending the net foreign buying to Rs. 5.6 billion worth of equities so far this year.

Shares in Ceylon Cold Stores Plc ended 5% higher, while conglomerate John Keells Holdings Plc closed up 1.2%, Vallibel One Plc ended up 7.9% and the biggest-listed lender Commercial Bank of Ceylon Plc ended 0.7% firmer.

The index dropped 0.13% last week, after marking three straight weekly declines.