Sri Lanka shares hit a month-long high on political stability hopes after the appointment of the new prime minister

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ECONOMYNEXT – Sri Lanka’s main stock market index gained more than 4% on Friday (12) to end more than a month ahead, driven by positive feelings of hope for political stability following the appointment of opposition lawmaker Ranil Wickramasinghe as the new prime minister, the dealers said.

“The market has risen solely on positive sentiment. But it will all depend on the performance of the prime minister and the cabinet that the new government will have,” a senior analyst said.

Wickramasinghe was named the country’s prime minister on Thursday evening for a record sixth time.

The cabinet to be appointed by President Gotabaya Rajapaksa in consensus with the Prime Minister has yet to be named.

The main All Share Price Index (ASPI) closed 4.43% or 343.79 points at 8,098.41 at the close, its highest close since April 8, according to official data.

The market rallied on Thursday solely on hopes that the political stalemate would be resolved with the appointment of a new prime minister.

The island nation saw the 60 a.m. curfew lifted at 7 a.m. Thursday after violent clashes killed at least 9 people, including a ruling party lawmaker, and injured nearly 300. The clashes, followed by supporters of former Prime Minister Mahinda Rajapaksa attacking unarmed protesters on Monday, saw the homes and vehicles of many members of Rajapaksa’s ruling party damaged and burned.

Rajapaksa resigned after his supporters brutally attacked peaceful protesters.

The attacks took place despite the state of emergency in the country in the presence of the police.

Since the violence, the market remained closed for two days until Wednesday.

The most liquid S&P SL20 index rose 5.52% or 139.56 points to close at 2,669.73.

Market analysts said investors were disappointed with the way the island’s politics were developing despite the people’s call for transparency and stability.

Turnover for the day was 2.18 billion rupees, its highest since April 29 and almost half of this year’s average daily turnover of 4.2 billion rupees.

The 84.5 billion euro economy has already suspended foreign debt payments because it ran out of dollars. Investors are also concerned about the sharp drop in the rupee, which has fallen more than 80% since it was allowed to show flexibility on March 7.

On Friday, the rupee was trading around 360 against the US dollar, down from 380 on Thursday. It is the first time the currency has appreciated since it was allowed to be determined by the market on March 7.

The market has gained 6.2% in May so far after losing 14.5% in March and 23% in April.

Overall, the market has lost 33.7% so far this year after being one of the best stock markets in the world with a return of 80% last year.

Foreign investors bought 9.1 million rupees worth of shares. The market has seen a total outflow of Rs 1 billion since the start of the year.

Shares of Expolanka Holdings rose 12.6% to close at 194.25 rupees per share, LOLC gained 6.7% to close at 497.50 rupees per share, while Aitken Spence ended up 13.25% to 81.20 rupees per share. (Colombo/May 13/2022


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