John Keells Stock Brokers tips ASPI to hit 28,000 this year

• Says index capable of further improvement on the back of continued recurring earnings growth even without accounting for multiple expansion
• Forecasts GDP to have growth trajectory with 4-5%
• Opines ample scope present for increased foreign participation in equities
• ASPI up 115% since September 2024 election of President Anura Kumara Dissanayake

John Keells Stock Brokers (JKSB) has tipped that the All Share Price Index (ASPI) will reach 28,000 this year.

This forecast is contained in JKSB’s Equity Market Outlook 2026 released recently. The ASPI on Friday stood at 23,812 points.

Noting that with the current administration quite convincingly sticking to the economic reforms that were necessitated by the current International Monetary Fund (IMF) program, JKSB said it is quite confident that 2026 should continue to see Sri Lanka remain on a growth trajectory with 4-5% of GDP growth. 

“Post-Ditwah, we feel inflation should continue to be muted albeit reaching 4-5% from the second half of CY2026. Primary fiscal surplus should be around 4% at least, and we expect a current account surplus as well with the near $ 2 billion of vehicle imports unlikely to be repeated in 2026,” JKSB said.

Although there is impetus on the Government to increase capital expenditure spending in the face of the infrastructure damage done by Cyclone Ditwah, JKSB feels that institutional constraints on quick approvals on projects mean that the spending is more likely to be staggered and less intensive than expectations. 

It also expects Government revenue to remain firm despite the reduced collections from vehicle imports (although Sri Lanka Customs recently announced reaching their January target of Rs. 160 billion in just the first 22 days).

Over the longer term, JKSB continues to expect expansion of the tax net to incrementally improve revenue to GDP from 15.6% to 16% in 2026 and higher going forward.

The broking firm said its coverage universe, which constitutes 70% of total market capitalisation, indicates that it is trading at 10.8x FY26E March/FY25E December earnings. “Our forward expectations are 9.2x FY27E March/FY26E December earnings, which we feel is modest in the current macro environment.,” JKSB added.

Private credit growth continues to maintain a run rate of Rs. 200 billion per month, volume growth in consumption only commenced over the last 12 months, and continued capital market deepening and catch-up economic reforms related to digitisation gives a long runway for earnings and GDP growth over the next 2-3 years at least. 

Foreign inflows have incrementally been seen in Treasuries over the last few months, and JKSB feels that there is ample scope for increased foreign participation in equities. 

Better valuations in the Colombo Stock Exchange (CSE) should also see increased Initial Public Offering (IPO) activity over the next 2-3 years, it emphasised.

While the 115% increase in the ASPI since the September 2024 election of President Anura Kumara Dissanayake might cause wariness among experienced investors, JKSB feels that a large part of this is due to the normalisation of profit margins post the hyperinflation of the economic crisis as well as catch-up economic growth. 

“We feel that the Index is capable of further improvement on the back of continued recurring earnings growth even without accounting for multiple expansion, which would be warranted by systemic lower interest rates as a result of fiscal and monetary discipline. As such, we expect the ASPI to reach 28,000 over CY26,” JKSB said.