Sri Lanka stock performance not related to politics, says broker

EconomyNext – Sri Lanka’s stock market will be volatile in the first half with two elections due but attempts to link its performance to that of any political party would  be "an exercise in politics", a stock broker said.

The island will have a presidential election on January 8 to be likely followed by parliamentary polls before May.

Incumbent President Mahinda Rajapaksa faces a strong challenge from Maithripala Sirisena, who defected from the ruling party to be the common candidate of a newly unified opposition coalition out to prevent Rajapaksa’s bid for an unprecedented third term.

Stock brokers said both main contestants and their parties have similar economic policies, supporting free markets and hence expect the polls to have only limited "downside."

Stockbrokers Lanka Securities said election years generally have coincided with favourable market conditions in the past, but which party becomes the winner has had no discernible or consistent impact on Colombo bourse.

"The exercise of using statistical analysis to claim one party is better for the stock market can be considered merely as an exercise in politics," it said in a recent research note.

"The stock market is ultimately a reflection of various underlying news, policies and domestic and international events.

"Therefore any efforts to relate the performance of the stock market to the performance of a specific political regime through statistical technique are quite unacceptable," the brokers said.

"What can be expected in 2015 is volatility especially in the first half of the year with two national elections taking place within a few months – presidential elections in January and Parliament elections before May."

Softlogic Stockbrokers said in a research note the presidential poll in January is likely to be a "closely fought battle".

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"Also with a shift in parliamentary support towards the opposition having taken affect as at end-2014, the intensity is further increased."

However, they said, with both candidates expected to follow free market strategies, the overall economic outlook seems positive.

"Therefore there would be limited downside triggered by the election outcome while we remain bullish on the medium to long-term market performance despite a period of lull in and around the presidential election week."
 

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