EconomyNext – Sri Lankan investors have been advised by stock brokers not to panic owing to short-term uncertainty caused by the new government’s policies and probes into past stock market irregularities.
Bartleet Religare Securities said the changes augur for the better in the long run and will create a more level playing field for investors.
The government last week announced it was re-appointing Tilak Karunaratne as chairman of the Securities and Exchange Commission (SEC), the markets regulator.
Karunaratne had quit after less than a year in office saying the former regime interfered with his investigations into market manipulations.
He is expected to revive probes that were subsequently shelved for apparent lack of evidence.
"The SEC is getting the tough enforcer Tilak Karunaratne back in the saddle as the new head," Bartleet Religare Securities said in a report.
"We believe this will be a move towards better governance and transparency in the Colombo Stock Exchange."
It said the market will take some pain in the short run, particularly with the retailers reacting to the changes.
"But over the long run we believe CSE will be a more level playing field for investors," they said.
"We continue to recommend staying in well-researched, apolitical midcaps. We believe the big foreign funds will not reduce the country exposure as they have taken a long term view in sectors like bank, finance and insurance and conglomerates."
The Colombo bourse saw some panic selling last week.
The CSE, which gained 23 percent in 2014, has slumped since the January 8 election of new President Maithripala Sirisena and his forming a new government.