The CSE seems to be settling into a much more CONSOLIDATED PHASE now. The market has bottomed out around 7,100 and bounced back on a few occasions meaning a high level of technical support. On the other hand, large corporations have recorded an impressive earnings quarter ending March 2021 where the current prices are not supportive. I sense following, based on additional reading and experience in the market.
Given this context, the following are the positive factors contributing to the growth in CSE activities.
Interest rates are likely to remain LOW for next 9~12 months.
With the rise of C19 third wave, the CBSL continued to maintain policy rates at historical low levels. This is due to the sluggish economic climate led by C19. Therefore, it is expected that the current low rates environment will be sustained in the next few months and do not expect major movements in rates in the short-term.
Regional stock markets remain strong despite COVID-19.
Equity markets in India, Pakistan, Bangladesh, and Thailand continued to be resilient amidst the Covid situation. As an example, the Indian market has performed better since then (as is the case with others too). Such narratives in Sri Lanka too could overcome the more negative narratives in the near-term.
Renewed investor interest in SL Bonds and recovery from very negative levels have increased investor confidence.
Increased Foreign Investor Interest in Emerging Markets
Sri Lanka has been spotted for new FDIs with the passing of Port City Economic Commission Bill which enhances investor confidence. Moreover, overvalued US equities and crashing of digital currencies have led foreign investors to rethink about emerging markets.
Low market valuations and improved performance by top corporations
Considering the above facts, CSE will test new heights in next few months with IMPROVED INVESTOR CONFIDENCE.
Hence, companies linked to large scale developments changing the landscape of Sri Lanka and companies where the PE is at bargains should be closely watched to gain any opportunities created by the market forces.