Sri Lanka Stocks Climb to 4-Year High on Sirisena’s Surprise Win

By Liau Y-Sing - Bloomberg.com

Sri Lanka’s benchmark stock index rose to the highest level in almost four years and the currency gained after President Mahinda Rajapaksa conceded defeat in an election that ended his decade-long rule.

Incoming President Maithripala Sirisena campaigned on a pledge to end nepotism and corruption, ensure religious harmony and wean the nation away from dependence on funding from China. Rajapaksa had cut fuel and power prices, raised pensions and lifted guaranteed crop prices for farmers to woo voters after a rule that critics say was marked by corruption.

The Colombo All-Share Index (CSEALL) rose 1.4 percent to 7,605.79, the steepest climb in a month and the highest close since March 2011. Commercial Bank of Ceylon Plc, the nation’s top lender by market value, surged to a record, while Printcare Plc advanced 17 percent, the most since August 2012. Ceylon Tobacco Co., the nation’s second-largest company, gained 1.4 percent.

“The election manifesto has been for a consumption-driven economy,” Bimanee Meepagala, assistant vice president for asset management at NDB Wealth Management, said by phone from Colombo. Meepagala said he’s bullish on retailers and lenders.

Rajapaksa has congratulated Sirisena and told him he can take over, Rajapaksa’s spokesman Mohan Samaranayake said by phone today. The president called the election in November, two years ahead of schedule, in a bid to consolidate power after his party saw its popularity fall in by-elections.

Bonds Fall

Under Rajapaksa, the $67 billion economy grew an average 7 percent a year since the end of the civil war in 2009, the fastest pace in South Asia. He shifted Sri Lanka toward China in the face of U.S. criticism of human rights abuses after he oversaw the end of the 26-year civil strife.

“We have to see how Sirisena is going to implement his economic agenda as Rajapaksa was the key driver of the country’s development post the end of the war,” Thomas Hugger, chief executive officer and founder at Hong Kong-based Asia Frontier Capital Ltd., said by e-mail.

Rajapaksa won the last presidential election in January 2010 with about 60 percent of the 10.4 million votes cast, the biggest majority in 16 years. He defeated his former army commander who helped end the island’s bloody insurgency.

The yield on Sri Lanka’s dollar bonds maturing in January 2019 rose for a sixth day, adding five basis points to 5.14 percent, the highest level since February 2014. The rate on the 8.5 percent local-currency government notes due in April 2018 climbed 14 basis points to 7.22 percent.

“The climb in yields is unsurprising because this entails uncertainty,” said Vishnu Varathan, senior economist at Mizhuo Bank Ltd. in Singapore. “Policy continuity is the first question. The other is whether a new administration would find enough traction to get the institutions working as smoothly.”

The Lankan rupee closed little changed at 131.54 a dollar.