Stock market prefers either Wickremesinghe or Premadasa: Tundra

Frontier markets specialist Tundra in its latest monthly commentary has opined that the stock market prefers either Wickremesinghe or Premadasa, whose political agendas are more predictable.

The August update stated that Sri Lanka was weighed down by political uncertainty ahead of the 21 September Presidential Election, where three candidates remain the frontrunners in the polls: incumbent President Wickremesinghe (21% in the latest opinion poll), leftist candidate Dissanayake (37%) and more liberal Premadasa (36%). 

In August, the latest poll was published that showed Dissanayake had overtaken Premadasa while Wickremesinghe had marginally increased his support. The election of the President in Sri Lanka is done so that every voter selects their favourite, but then also ranks the other candidates (second choice, third choice, etc.). If no candidate receives at least 50% of the votes in the first round, another count takes place where the second choice for the candidates who have been eliminated are also counted. 

Many of those who vote for Wickremesinghe will likely have Premadasa as their second choice as he is perceived as the closest to Wickremesinghe politically. However, some of those who vote for Premadasa might be doing so because they want to bring about change, and then it is less certain that their second choice is Wickremesinghe. 

Premadasa losing popularity is thus seen as worrying as it increases the probability that the politically more unproven candidate, Dissanayake, will win. Regardless of which candidate takes office, he will have to manage the relationship with the IMF. It is clear, however, that the stock market prefers either Wickremesinghe or Premadasa, whose political agendas are more predictable.