Bourse rebounds to 11-week high on earnings, political stability hopes

Reuters: Shares rose to an 11-week high on Friday as investors bought risky assets on hopes of better March-quarter earnings and political stability after Parliamentary elections.

The main stock index ended up 0.3%, or 21.80 points, at 7,258.67, its highest close since 27 February.

“The market seems to have been driven by increased local investor confidence backed by strong corporate earnings,” said Danushka Samarasinghe, Head of Research at Softlogic stockbrokers.

“There is also the expectation of an early Parliamentary election with a higher possibility of the ruling United National Party (UNP) winning with a majority.”

Political uncertainty due to Prime Minister Ranil Wickremesinghe-led UNP not having a Parliament majority had been a drag on the market. The trend reversed after the Central Bank cut key monetary policy rates to record lows on 15 April.

Investors had been waiting for direction on the political front, analysts said, with the Prime Minister saying he would invite the main Opposition to join Government when he wins the Parliamentary polls, which is yet to be scheduled.

Analysts, however, still expect the index to move sideways until the situation becomes clearer.

President Maithripala Sirisena has promised to dissolve Parliament after passing some key reforms next week.

Friday’s turnover was Rs. 1.09 billion ($ 8.17 million), around this year’s daily average of around Rs. 1.11 billion.

Foreign investors net bought Rs. 115 million of shares, extending the year-to-date net inflows to Rs. 5.76 billion in equities.

Ceylinco Insurance Plc, which boosted foreign buying to a one-year high on Thursday, jumped 6.24%, while Carson Cumberbatch Plc rose 3%.

The Bourse has gained about 5.2% since the Central Bank cut key rates on 15 April, while yields on T-Bills have fallen 46-61 basis points since then.

As of Friday, earnings of 57 listed companies have on average showed a rise of 26.1% year-on-year in the first quarter, said an analyst.