The market at current valuations is still higher than regional markets.Positives
Sri Lanka is growing at a rapid pace and the CSE companies are growing at 30-40% annually on average for past two years.
If this momentum continues then the CSE is undervalued based on forward earnings. Current trailing PE is around 16X and forward PE is 11X 2013E. Most regional markets trade between 12-15X. Given the positive story of Lanka, CSE is well poised to grow but not at the same pace as 2009-2010.
The Central bank deputy governor has said that there will be foreign inflow into the country and part of it will be into CSE is a thing to look forward to but details are murky about this so we will have to wait and see.
Quarterly results should start to flow in from sometime next week until end November keeping the investors on their toes for selected undervalued stocks. I dont see any negative growth for most companies and reports will show growth. Companies which had IPO's like VONE, SHL, EXPO, FLCH and others will be putting out thier results and they are more likely to be positive.
The budget is more or less likely to be investor friendly and i dont think we need to worry much about it. The political environment is also stable.Negatives
Pressure on the currency due to widening trade gap can slow the economic growth and putting pressure on inflation and intrest rates.
Global recession keeping foreigners away and hindering exports to developed nations. This will also have an impact on the tourist sector.
Negative budget impact on the Motor sector where taxes are expected to increase.
Human rights issues but i feel the recession and middle east crisis are bigger headaches for the West.
The above are my opinions and critics welcome.