How the ASI Fared Against Key Global Indexes After the ME CrisisCSE All Share Price IndexCSELK:ASIHR2302The Middle East crisis triggered a broad risk‑off move across global equities, but the Colombo ASPI has been one of the worst performers, falling 15%, well above the drawdowns seen in major markets. Index Performance Since the Crisis ASI : Down 15% NIKKE : Down 11.2% NIFTY : Down 8.18% FTSE : Down 7.83% S&P : Down 5.4% HSI : Down 4.4% Japan’s sharper decline is understandable: nearly 90% of its energy supply depends on flows through the Strait of Hormuz, making it highly exposed to geopolitical disruptions in the region. Sri Lanka, however, shows a disproportionately large correction relative to global peers. Why Is the ASI Falling More Than Other Markets? 1. Fragile Investor Confidence? Sri Lanka’s equity market remains highly sensitive to external shocks. The outsized reaction suggests investors lack confidence in the government’s crisis‑management capacity, especially in periods of geopolitical or macro stress. Repeated Pattern of Panic Selling We saw a similar dynamic after the DITWAH cyclone, where the ASI sold off more aggressively than fundamentals justified. 2. Persistent foreign outflows Sri Lanka has recorded continuous foreign outflows during recent past, and the pace has accelerated in recent months. 3. Inflation risk rising despite low interest rates Policy rates are at multi-year lows, but this is precisely what heightens the risk. With the rupee weakening and global energy prices rising and inflation is already turning upward. Is the market now pricing the possibility of: • a renewed inflation spike? • pressure on the currency? • potential tightening ahead? This shift in expectations is enough to trigger a valuation reset. What to Watch 1. Middle East Crisis – Direction of Geopolitical Risk The next leg of market sentiment hinges on how the ME crisis evolves. Any escalation that pushes oil higher or disrupts shipping lanes will feed directly into Sri Lanka’s inflation outlook, FX pressure, and equity risk premium. 2. Monetary Policy Decision – Review No. 02 of 2026 Date : Wednesday, 25 March 2026 CBSL’s commentary will be critical. Market is looking for signals on: • inflation trajectory amid rising energy costs • FX stability • whether tightening risks are back on the table A hawkish shift—even in language—could influence equity valuations. 3. IMF Review and Commentary – End March / Early April The upcoming IMF review will shape expectations on: • fiscal discipline • external financing • reform momentum • debt sustainability A constructive review could stabilize sentiment; any delays or negative commentary may reinforce risk aversion.