Following the defeat of the Tamil Tigers’ (LTTE) 26-year insurgency in Sri Lanka, the Colombo Stock Exchange (CSE) surged, with the All Shares Price Index (ASPI), which tracks the movement of all the stocks listed in the CSE, recording its sixth highest daily percentage growth in history, and the Milanka Price Index (MPI), composed of 25 select equities, realizing its fifth highest percentage growth in history. Meanwhile, volume during the week reached the four highest number in history. While there was some profit taking on Friday, the ASPI gained 20% for the week (4.21 points) to end at 2,146.73 while the more liquid MPI gained 34% (8.25 points) to close at 2,466.90. Both indices are now up over 35% for the year.

Not surprisingly perhaps, some of the week’s biggest gainers were in tourism, lead by Miramar Beach Hotel (up 33%), Taj Lanka Hotel (22%) and John Keells Hotels (19%). The biggest gaining sector was the diversified one, lead by John Keells, which deals in ports, tourism, retail, food and beverages, financial services and property and is considered by analysts as a proxy for investment in the country, per news reports. Despite the profit taking on Friday, Geeth Balasuriya, research manager at Acuity Stockbrokers, doesn’t see the upward market trend abating quite so quickly. “We expect the positive sentiment to continue into the short to medium term,” he surmised.

Sri Lanka, for various reasons, is an overlooked market, but given civil stability that should quickly change. Its population roughly equals that of Australia, for example, and per capita income is nearly double that of India. Billions of dollars spent containing the LTTE can now be funneled for other purposes, pundits note, and rebuilding the nation’s infrastructure should be on top of the list. IMF funds and those from the Tamil diaspora must also be taken into account, and firms in India will likely receive the bulk of any contract work. Additionally, tourism to the island can be expected to explode, especially given some 350 sq km of beaches and hill stations, cities and historic sites. Finally, a hitherto underutilized port–the port of Trincomalee, which lies on the main shipping lanes–can be used to complement Colombo, observers say, and also compete with Indian ports.

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