Sri Lanka rupee, stocks jump on civil war end

Colombo: Sri Lankan shares and the rupee surged on Monday after the military announced it had defeated Tamil Tiger rebels in a civil war dating back to 1983.

The Colombo All-Share index jumped 7.14 per cent before closing 6.46 per cent or 123.23 firmer to a seven-month high of 2,030.90, its biggest daily per centage rise since January 26, 2006.

"Investors are aware of the country's financial crisis and other problems, but the boom is due to the end of a long-fought war," said Hussain Ghani, associate director at Asia Securities.

The Tamil Tigers conceded defeat in Asia's longest-running conflict on Sunday.

Sri Lankan special forces troops killed Tamil Tiger leader Vellupillai Prabhakaran as he tried to flee the war zone early on Monday in the final battle, the military said.

Stockbrokers said the first half-hour of dealing generated trading volume of over 200 million rupees, half last year's full-day average.

Top conglomerate by market capitalisation, John Keells Holdings surged 16.77 per cent to a nine-month high of 92.25 rupees, as calculated on a weighted average.

Market heavyweight Sri Lanka Telecom jumped 12.1 per cent to a near one-year high of 44 rupees, while top mobile phone operator Dialog Telekom rose 4.76 per cent to 5.50 rupees a share.

Market turnover was 1.23 billion rupees ($10.7 million), three times last year's daily average volume.

The rupee rose 2.43 per cent to a one-month high of 114.90/115.10.

"Exporters, banks and all traders are selling dollars due to the market confidence on the war-end sentiment," said a currency dealer. "The market thinks that a high volume of donor funds could make the rupee stable soon."

Analysts said the end of the conflict could bring an inflow of dollars from donor nations to pay for post-war reconstruction. That would bolster low foreign exchange reserves, which barely cover six weeks of imports.

Sri Lanka's government bond yields fell by around 1 per centage point on Monday, on expected foreign exchange inflows from donors and others, including the IMF, which had withheld funds on concerns about the conflict and civilian death in the war zone, dealers said.

Analysts said market fears a $1.9 billion International Monetary Fund loan would not come through had eased. The United States, Britain, France and the United Nations have all been adding diplomatic pressure on Sri Lanka, including threats to delay the IMF loan until there was a solution to the war.