Bourse jumps 2% on easing global pressure hopes

Thursday, 17 May 2012 02:37 -     - {{hitsCtrl.values.hits}}

Reuters: Sri Lanka’s stock market climbed more than two per cent on Wednesday to a one-week high as retail investors snapped up hotel and diversified shares on the hope that President Mahinda Rajapaksa would soon order the release from prison of the former Army Chief and prompt more foreign inflows to the market.

The main share index rose 2.03 per cent in intraday trade but it closed 1.71 per cent, or 87.82 points, up at 5,213.68, its highest close since 9 May. It was the third consecutive session posting a gain.

An opposition lawmaker and the main negotiator on behalf of the former Army Chief, General Sarath Fonseka, said he believed the President would order his release soon.

Fonseka is serving two sentences handed down by civilian and military courts, including a conviction for misappropriation, after challenging Rajapaksa in the 2010 presidential election. He is considered a national hero by many Sri Lankans for his role in helping end a 25-year civil war.

Analysts said his release would be seen as a positive step in addressing human rights issues.

“The move could ease the international pressure on Sri Lanka with regard to lack of democracy and rights violations, this will help to boost foreign investor sentiment on Sri Lanka,” said a stockbroker who asked not to be identified.

Since the end of the civil war in 2009, foreign investors have been reluctant to invest in Sri Lanka’s bourse amid heavy international pressure on Rajapaksa’s Government to address rights abuses, particularly in the final stages of the conflict.

The hotel sector boosted overall market sentiment with Aitken Spence PLC and Asian Hotels and Properties PLC gaining 3.24 per cent and 1.52 per cent respectively as the Government data showed that tourist arrivals in April rose nine per cent from a year earlier.

Analysts said large and institutional investors remained concerned about economic woes, with uncertainty over the rupee currency and rising interest rates.

The Bourse had fallen 6.34 per cent over nine sessions through last Friday as investors sold their stakes over worries about a defaulted share deal on The Finance Company, which is now under a regulatory investigation.

The daily turnover was Rs. 542.5 million ($ 4.20 million), the highest since 9 May, but well below this year’s daily average of Rs. 1.1 billion.

The index is still one of the worst performers among Asian markets, with a 14.17 per cent loss so far this year.

The rupee ended flat at 128.90/129.00 against the dollar from Tuesday’s close, as importer demand offset dollar sales by exporters, dealers said.

The benchmark 91-day t-bill rates eased 20 basis points to 11.99% on excess market liquidity of more than Rs. 30 billion, which dealers attributed to the Central Bank buying dollars from a foreign bond sale by a State bank.

K.D. Ranasinghe, the Central Bank’s Assistant Governor, said the monetary authority bought a portion of the Bank of Ceylon’s $ 500 million bond inflow, but gave no exact figures.