Year 2010 begins with record performance

Acuity Stockbrokers (Pvt) Ltd in their weekly stock market review indicated that the week started off with an optimistic note on Monday before dipping slightly towards mid week on profit taking.

However on Friday indices managed to regain the lost ground while recording substantial gains, resulting in the All Share Price Index (ASPI) reaching its all time high levels and the more liquid Milanka Price Index (MPI) exceeding 4,000 points for the first time since February 2007.

Overall, for the week the ASPI gained 129.1 points or 3.8% to close at 3514.6 points while the liquid MPI inched up by 190.0 points or 4.9% to stand at 4039.4 points on Friday.

A major highlight during the week was the Rs.4.8 billion contribution by JKH on Wednesday, which pushed the day’s activity to Rs.6.0 billion. On Wednesday, several strategic deals consisting 26.7 million JKH shares, took place at a price of Rs.179.00 per share. The counter in total traded 33.0 million shares during the week, topping the week as the largest contributor towards the market activity amounting to Rs.5.9 billion.

During the week the counter traded at a low of Rs.172.00 per share and a high of Rs.183.75 per share to close the week 5.0% up at Rs.180.00 per share. Also, helping market activity was Renuka Agri Foods (RAL) which opened for trading on Monday after the successful initial public offering.

The RAL share surged 64.4% on Monday to close at Rs.3.70 per share, while ending the week at Rs3.50 per share. Counter managed a turnover of Rs.220.7 million during the week becoming the fourth largest contributor towards week’s turnover while also becoming the highest traded stock during the week with 58.7 million shares.

Trading activity surged above Rs.10.0 billion during the week as a result of large quantity trades on JKH with around 52.6% of the total turnover contributed by JKH alone. Total turnover for the week amounted to a mammoth Rs.11.2 billion up by 477.1% compared to last week’s turnover of Rs.1.9 billion.

Meanwhile daily average turnover for the week stood at a high of Rs.2.2 billion Foreign participation this week was significantly high at 57.4% of total activity, as the highest turnover contributor this week JKH trades went through as foreign trades. Foreign Purchases for the week totaled Rs.6.1 billion, while foreign sales were higher at Rs.6.8 billion this week. The resultant net foreign outflow amounted to Rs.639.2 million.

Volume wise highest traded stocks this week were, Renuka Agri, JKH, Dialog, Hotel Services and Seylan Bank (Non Voting)

In their point of view Acuity indicated that in the light of the information on the market P/E and the sentiment of the foreigners, one could argue that the Colombo bourse is over heated at the moment. Albeit, the overheated argument, “expected earnings growth for the next year supports the market climb” could be another school of thought. Hence, Acuity have formulated two more scenarios assuming a real GDP growth of 6% and 8% for the year 2010, and invariably calculating the corporate earnings levels of 60% and 63% growth respectively.

Further, inline with the scenarios, an estimate of an optimum ASPI index (assuming a market PE of 14) have been reached.

Considering all the various options, they indicated that they could arrive at an average ASPI index of 3709.4. In comparison with the current ASPI of 3514.6, the expected potential upward movement based on sheer fundamental calculations is a maximum of 194.7 points. Also, a noteworthy point is that Index movement for the first week of 2010 was 129.03 points.

Thus, assuming to move on with the fundamental ASPI figure, the bourse would reach the critical mass within the month of January, 2010.

Hence, considering all above Acuity feel that investors should be cautious buying, and look to profit out, in anticipation of the Bourse cooling down.

- Asian Tribune -