By Duruthu Edirimuni Chandrasekera
It doesn’t come as a big surprise that immediately after the big political changes, the stock market always reacts positively.
This was seen when President Maithripala Sirisena came to power in January 2015 and in October 2018 when Mahinda Rajapaksa was sworn in as the Prime Minister. On Monday, the same scene unfolded a day after Gotabaya Rajapaksa was elected President. “Always when changes happen the market acts positively. We have always seen the market moving up to 100 points after these crucial events,” Atchuthan Srirangan, Assistant Manager Research (Fixed Income Equities), First Capital Holdings told the Business Times. He added that always with such political changes the market participants are upbeat. But analysts say this trend doesn’t necessarily sustain. The Colombo bourse closed high on Friday having risen throughout on Monday with brokers and investors cheering the new President.
“From the second day itself – that is Tuesday – we saw profit-taking and then the market was on a slightly sideways trend,” Mr. Srirangan said. Friday morning saw the market 50 points up in the early hours but within 15 minutes, it was 30 points down. A market analyst noted that this was the trend from Monday onwards till Friday. The Colombo Stock Exchange (CSE) was down 19.06 per cent to close at 6,119.27 on Friday with the S&P losing 6.35 per cent to end at 3,022.
However the analyst said that there is a clear upward trend. The market has been booking high turnovers since the October 31 to November 15, he said noting that such numbers also didn’t come as a surprise. On October 31 the turnover was Rs. 2 billion, November 1 it was Rs.1 .7 billion, November 5 it was Rs. 1.9 billion and November 13 it was Rs. 2.01 billion. The reason for this being, the analyst explained, when elections approach, based on the perception of stability the investors take a bet. This was why the turnovers were high at varying times.
“Investors are waiting for a signal on the general elections in two months,” the second analyst said explaining that the market performance can be analysed thereafter.