Sri Lanka shares recover

The prime minister returned from the US to a country in turmoil

Sri Lanka's stock markets have rallied in celebration at the lifting by President Chandrika Kumaratunga of the country's emergency laws.

Shares rose by more than 12% on Friday, regaining losses made in near panic selling as the country slid towards political crisis earlier this week.

The state of emergency, imposed by President Kumaratunga in a confrontation with Prime Minister Ranil Wickremasinghe, took a heavy toll on investor confidence, shaving up to 20% of the bourse's value.

News that the emergency laws were being eased also boosted the Sri Lankan rupee, which rose by more than 1% against the dollar.

Sri Lanka has been one of the best performing Asian markets this year as investors have welcomed the prospect of an end to two decades of conflict between government forces and Tamil separatists.

Recovery

Until the recent political crisis the Colombo all-share index had posted gains of more than 70% in 2003.

The economy is forecast to grow by up to 6% this year with a peace dividend also expected to boost the fast-growing tourist industry.

But differences over the peace process lie at the heart of the confrontation between Mrs Kumaratunga and Mr Wickremasinghe, who are bitter rivals from opposing political parties