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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2787

JKH deals lift market activity

By Quintus Perera – Asian Tribune

Acuity the Stock Brokering arm of HNB and DFCC in their weekly review indicated that Colombo shares sparked into life on Friday after strategic deals by blue-chip JKH boosted market activity and helped regain some of the lost ground during the early part of the week.

Nonetheless, on a Week-on-Week (WoW) basis the All Share Price Index (ASPI) lost 13.7 points or 0.78% to close the week at 1734.4 points while Milanka Price Index (MPI) closed the week at 1843.7 points down by 23.1 points or 1.24% compared to last week’s closing levels.

In the spotlight this week were the strategic deals struck by Sri Lanka’s premier conglomerate JKH on stakes of three listed companies, reportedly divested by another conglomerate Carsons Cumberbatch Group together with its subsidiaries Ceylon investments (CINV) and Ceylon Guardian (GUAR). Blue chip JKH on Friday acquired 37% of Union Assurance raising its stake to 74% that triggered a mandatory offer for the remaining shares of Union Assurance. The trade consisted of 13.9 million shares that went through at a price of Rs.72.00 per share.

Helped by the trade the counter in total contributed Rs.1.0 billion towards the week’s market turnover, reflecting 36.5% of week’s total turnover while the total volume traded for the week stood at 14.0 million shares. The price of the counter rose by 6.2% Week-on-Week at Rs.68.50 per share.

Apart from Union Assurance, Ceylon Cold Stores (CCS) and John Keells PLC (JKL) were among other counters subjected to acquisition deals by JKH. A quantity of 4.4 million CCS shares changed hands at Rs.115.00, while the 1.7 million quantity of JKL were bought over at Rs.60.00 per share. The strategic stakes increased JKH’s shareholding in Ceylon Cold Stores and John Keells PLC to 80.5% and 86.9% respectively. CCS observed a 3.5% price increase to Rs.90.00 per share while JKL saw a decline of 10.6% to Rs.65.25 per share during the week.

Dialog saw notable quantitie of trading this week, with the major portion of Rs.316.4 million coming on Thursday. Approximately 78.0 million shares of Dialog traded this week, closing at Rs.4.90 per share on Friday. The share price saw a 2.0% Week on Week drop, while it traded at a high of Rs.5.25 and a low of Rs.4.90 per share for the week. Dialog was the third highest contributor towards weekly turnover with a contribution of Rs.390.1 million.

Conglomerate JKH saw its share price declining by 0.4%, despite its strategic acquisitions, with the counter closing at Rs.65.25 per share. The share hit a peak of Rs.67.50 and a low of Rs.64.00 over the week. Around 3.1 million JKH shares traded this week, with contribution towards weekly turnover amounting to Rs.204.9 million.

Activity levels picked up this week with total turnover amounting to Rs.2.8 billion, showing a significant 705.8% improvement compared to last week. As highlighted above the main contributions towards turnover came from the strategic deals associated with the blue chip JKH. The average daily turnover for the week amounted to Rs.553.3 million.

Foreign investors remained net buyers this week amounting to a modest Rs.36.5 million. Foreign purchases increased to Rs.316.3 million compared against Rs.75.1 million recorded last week, while foreign sales too gained compared to last week’s level of Rs.21.6 million, to Rs.279.8 million this week. Foreign participation however saw a slight decline this week to stand at 10.8% of total activity, compared to 14.1% posted last week.

Among the highest traded stocks for the week were Dialog, Union Assurance, Tokyo Cement (Non Voting) and Ceylinco Seylan. In their point of view Acuity indicated that Cautious sentiment continued in the marketplace with investors looking for direction in the macro front. During the week All Share Price Index lost 13.7 points while Milanka Price Index declined by 23.1 points compared to last week’s closing levels.

In the week ahead Acuity expects the sentiment to remain weak with limited retail activity. However they continue to advise investors to stick to fundamentally sound stocks mainly in sectors with growth potential.

In their Economic Update Acuity indicated that Sri Lanka’s external trade deficit widened further in December as country’s agricultural and industrial exports markedly fell amid tumbling commodity prices and slowing growth in key export destinations.

In December export earnings dropped by 19.1% YoY to US$ 680.7 million compared to same month of previous year. Agricultural exports plunged 18.5% YoY to US$ 120.8 during the month with tea exports, which accounts for nearly three-fourths of segment’s revenue declining by 22.5% YoY to US$ 81.2 million. Meanwhile industrial exports also contracted 18.7% YoY in December to US$ 556.2 million with all major sub sectors recording negative growth. Textiles and garments declined 6.3% YoY to US$ 373.3 million.

Meanwhile import expenditure declined for the second consecutive month by 9.7% in December to US$ 1.05 billion primarily backed by cheap petroleum imports. Petroleum imports plunged by 38.4% YoY during the month to US$ 195.2 million, consequently total expenditure on intermediate goods fell 19.0% YoY to US$ 546.5 million. With export earnings falling at sharper rate than imports in December, overall trade gap widened 15.1% YoY to US$ 367.9 million compared to December 2007.

Cumulative export earnings during 2008 (Jan-Dec) totaled US$ 8.14 billion, up by a marginal 6.5% YoY compared to previous year. Cumulative imports, however, surged 24% YoY to US$ 14.01 billion largely due to heavy spending on petroleum imports during the first half of 2008. Despite falling notably during the last quarter total petroleum bill in 2008 was 34.7% higher than the previous year amounting to US$ 3.37 billion. Consequently overall trade deficit for the year stood at US$ 5.87 billion, 60.6% higher than the previous year.

On a positive note remittances increased by 16.6% during the year to US$ 2.92 billion in 2008. Nonetheless, witnessing the lack of financial and capital inflows to counter a hefty trade deficit, Central Bank’s gross official reserves declined further to US$ 1.75 billion, which was sufficient to finance around 1.5 months of imports.

- Asian Tribune -

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