Stock market falls on political uncertainty after LG polls

Reuters: Sri Lankan shares fell yesterday as political uncertainty, after a local council poll in which the two main ruling parties were defeated dampened investor sentiment.

The Colombo stock index ended 0.45% lower at 6,542.99, slipping from its highest close since 8 November 2017 hit on 9 February. The index gained 0.8% last week, its third straight weekly increase.

President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP) and Prime Minister Ranil Wickremesinghe’s centre-right United National Party (UNP) secured only a few council seats, raising concerns over the future of the current unity government that took office in August 2015.

Shares in conglomerate John Keells Holdings PLC fell 2%, while Sri Lanka Telecom PLC ended 3.8% weaker and biggest listed lender Commercial bank of Ceylon PLC lost 1.01%.

“The uncertainty after the defeat brought down the market. Investors will wait to see some stability and directions on how both the coalition partners are going to go forward with a stable government,” said Acuity Stockbroker Chief Executive Officer Prashan Fernando.

The surprise win by a political party backed by former president Mahinda Rajapaksa, who lost the presidential poll in 2015, could undermine the island nation’s unity government and its reform agenda, analysts said.

Rajapaksa’s Sri Lanka Podujana Peramuna (SLPP) won control of 231 local councils out of a total 340, while Wickremesinghe’s centre-right United National Party (UNP) took 34 councils and the rest were split among other parties.

Rajapaksa yesterday called for parliament to be dissolved and fresh elections to be held after the party he backed swept local council polls in the strongest rebuff yet to the unity government.

Turnover stood at Rs. 597.6 million ($ 3.86 million), well below last year’s daily average of Rs. 915.3 million.

Foreign investors, however, bought a net Rs. 289.2 million worth of shares yesterday, extending the year-to-date net foreign inflow to Rs. 5.3 billion worth of equities.

The markets will be closed for a public holiday today. Normal trading will resume tomorrow.