Triumphant trillion

* Hot on the heels of establishing itself as the world’s best performing, Colombo bourse Market capitalisation tops mystical figure of Rs. 1 trillion
* Scoring centuries: Market cap and both indices gain over 100% year to date
* Local investors get bullish about prospects for equities on anticipation of improved macro economic fortunes

Investors in Sri Lanka’s tiny bourse are getting richer by the hour as the market capitalisation yesterday topped the mystical figure of Rs. 1 trillion (nearly US$ 9 billion) hot on the heels of hitting global headlines as the world’s best performing on Monday.
Within seconds after its opening at 9.30 a.m, the Colombo stock market saw its value cross the Rs. 1 trillion mark, up by over Rs. 7 billion from Monday’s close of Rs. 994.5 billion. After five hours of momentous trading, the Bourse ended the day at Rs. 1.002 trillion, up by 105% or a massive Rs. 513 billion from early this year.

Talking of bulls and bears? A relaxed Premier Ratnasiri Wickramanayake in an animated conversation with capital market officials after making a surprise visit yesterday to the record-setting Colombo Stock Exchange. Securities and Exchange Commission Chairman Udayasiri Kariyawasam, Director General Channa de Silva, CSE Assistant General Manager IT Lalin Paranavitana and Business Development Manager Tushara Jayaratne are present

Reinforcing its global supremacy, the Colombo bourse has year to date provided an over 100% return to investors (109% in terms of gain in ASPI and 117% in terms of MPI).
On Monday, Reuters confirmed that the Colombo Stock Exchange (CSE) was the best performing in the world for the year to date.
This was following the All Share Price Index (ASPI) breaking further records when the index closed at 3,098.2, the highest point reached by the CSE index.
This momentum persisted as the ASPI closed yesterday at 3,127 and MPI at 3,547 points.
Among the top 10 contributors to rise in the ASPI were three Carson Group companies, LB Finance, Kuruwita Textiles, Ceylon Threates and Merchant Bank.
A Reuters report yesterday however said that with a return of over 108 percent so far this year, it is the second-best performing bourse in the world after Lima’s stock market. Its rise is around double that of the benchmark emerging market equities index.
Analysts said that the sustained Bull Run is largely driven by local investors who have become more optimistic of an improvement in macro economic fortunes of the country. They include strong post-war economic growth, declining interest rates and easing inflation.
The unprecedented achievement of the stock market will be bitter medicine for the usually market-friendly UNP which has been raising concerns over the deteriorating state of the economy as well as its future outlook.
Cashing in on the wave of massive investor optimism, the Government didn’t waste the opportunity as Premier Ratnasiri Wickramanayake made a surprise visit to the public gallery of the Colombo bourse.
In a 45-minute look around, the Premier was given a brief outline of some of the achievements this week by officials of the CSE as well as the regulator the Securities and Exchange Commission.
“The market has gone past everybody’s expectations,” Harsha Fernando, CEO at SC Securities, was quoted by Reuters as saying. “The rise is totally fuelled by retailers and the market is running out of steam. We expect a correction tomorrow.”
Sentiment, mainly domestic-driven, has also been boosted by a fall in inflation to a record low of 0.7 percent in September and a decision the same month by the central bank to cut its policy rates by 50 basis points.
High post-war economic growth hopes, more market liquidity, a $2.6 billion IMF loan, an upgraded rating outlook and foreign inflows have overall boosted investor confidence since the end of a 25-year war against the Tamil Tiger rebels in May.
The bourse has risen 63.9 percent since then, making the world’s best performing market in the last six months with an 89.23 percent return.
Analysts and traders said though there have been a lot of queries from foreign funds on the bourse, they are yet to see inflows into the market.
As of Tuesday, net foreign inflows totalled 613.2 million rupees ($5.34 million) this year, a fraction of the 14.1 billion rupees seen in 2008.
Analysts and traders said the market is oversold and has gone up due to some fundamentally unsound shares and heated up.
Top mobile operator Dialog Telekom closed 6.06 percent firmer at an over one-year high of 8.75 rupees, while conglomerate Carson Cumberbatch rose 5.34 percent to 379.50 rupees a share.
Turnover on Tuesday hit 1.18 billion rupees ($10.3 million), more than double of 2008 daily average of 464 million rupees.
The central bank cut its key policy rates on Sept. 11 to four-year lows to compel commercial banks to boost private sector lending and spur faltering growth.
The rupee closed flat at 114.80/85 a dollar with the central bank buying dollars at 114.80, dealers said.
The interbank lending rate or call money rate edged down to 9.332 percent from Monday’s 9.491 percent.

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Sri Lanka’s stocks sizzle, but why so few foreign investors?