Sri Lankan shares surge

The Tigers say rebuilding of the north-east has been too slow

Sri Lanka's stock market has hit an eight-year high, as investors shrugged off worries about a suspected Tamil Tiger killing of a policeman in Colombo and bet on renewed progress in peace talks.

The talks have now been suspended for much of the year to date, following accusations by the Tigers that the promised reconstruction funds were failing to emerge.

But despite that, and frequent violations which have opposition parties in Parliament calling for the government to break off negotiations, investors are buying with gusto.

The Colombo Stock Exchange's CSE index was up 4.5% by the close of trading on Monday to 1,039.95, a level last reached in January 1995.

Much of the recent run-up has come about following promises of $4.5bn for rebuilding the island's infrastructure, stricken by two decades of conflict, made by international donors at a conference earlier this month in Tokyo.

Economic growth is forecast to reach 5.5% this year.

How long?

The stock market has gained 27.5% this year, but some analysts doubt whether the bull market - which has seen ordinary Sri Lankans pile into brokers' offices yelling out trading orders - can last.

"The rally is a bit surprising," said one analyst.

"There is a lack of shares up for sale, and that could be one of the reasons. No-one wants to sell."

And as yet, efforts by long-suffering Norwegian peace negotiators to get the two sides back to the table, amid insults directed at them by hardliners on both sides, are making little headway.

Tuesday's trading, one market-watcher said, could prove more disappointing, depending on how the market reacts to news that a suspected Tiger double agent had walked into a police station in Colombo and shot dead an anti-terrorism police inspector.