Sri Lankan stock market capitalization climbed to a record

Sri Lankan stock market capitalization climbed to a record on Sep 17th as the end of the 26-year civil war boosted stocks, making the island’s benchmark index the best performer in Asia this year.

The South Asian country’s Colombo All-Share Index has gained 96 percent this year as the army defeated the Liberation Tamil Tigers of Eelam in May. The Colombo All-Share Index was the region’s third-worst performer in the past two years as record spending on defense strained government finances, and the country sought an International Monetary Fund loan.

The market value of the 238 stocks that constitute the All- Share Index climbed to 942.6 billion rupees ($8.2 billion) yesterday, the exchange said in a release posted on its Web site. That surpassed the earlier high set on Feb. 13, 2007, the bourse said.

Sri Lankan stocks may offer better returns as the end of civil war frees up government spending for investments in infrastructure and agriculture, investor Jim Rogers said last month. The end of almost three decades of civil war in May and a $2.6 billion loan from the International Monetary Fund helped restore investor confidence and attracted foreign flows, the central bank said July 23.

Standard & Poor’s raised its outlook on the island’s credit rating on Aug. 25 to stable from negative, citing improved foreign-exchange reserves.

The nation’s central bank raised its 2009 growth forecast to as much as 4.5 percent in July from an earlier estimate of 2.5 percent after the separatists’ defeat. Sri Lanka plans to raise $500 million from overseas investors to help rebuild the nation, central bank Governor Nivard Cabraal said in an interview on July 31.