The preceding week saw the Colombo bourse fall amid margin calls triggered by the announcement of the exit price of the Expolanka Holdings PLC (EXPO) voluntary offer and speculation of the possible dissolution of Parliament, which has since been refuted by political authorities.
Speaking to The Sunday Morning Business, First Capital Holdings Research Manager Ranjan Ranatunga stated that the volatility observed last week had largely been due to the margin calls triggered following the announcement of the exit price of the EXPO voluntary offer.
He pointed out that with EXPO delisting, all the leverage that had been given against the EXPO counters held by investors were forced to be sold in order to reduce the lender’s exposure.
He stated: “The downtrend in the market was also driven by the political uncertainty resulting from a rumour that Parliamentary Elections would be held first. However, this rumour was rejected by Minister Bandula Gunawardana.”
Commenting on the future movement of the Colombo Stock Exchange (CSE), he stated that the market would be very volatile in the short term.
He said that possible catalysts for the movement of the market would be the successful conclusion of the External Debt Restructuring (EDR) which was expected to be completed by next month, the better-than-expected financial results reported by listed companies for the quarter ending in March, and the decision of the Monetary Policy Review scheduled for 28 May.
Ranatunga remained bullish on the market, pointing out that with the current low-interest rate regime where the Average Weighted Lending Rate (AWLR) had fallen to around 13%, the most viable investment available to investors was the equity market.
He also pointed out that many high-net-worth investors had already taken positions in blue-chip counters.
During the preceding week, the benchmark All-Share Price Index (ASPI) constricted by around 300 basis points, falling below the 12,300 points mark.
Similarly, the blue-chip Standard & Poor’s Sri Lanka 20 (S&P SL20) Index also fell by around 150 basis points during the week.
Source: The Morning
