Indices touch new high for 2009

By Quintus Perera – Asian Tribune

Acuity – the stock brokering arm of HNB and DFCC indicated that Market opened on a positive note this week and remained bullish with the indices touching a new high for 2009 on improved activity. Investors continued to pick undervalued blue chip counters, pushing indices to the highest close since November 2008.

All Share Price Index (ASPI) closed the week at 1896.0 points improved by a notable 57.6 points or 3.1% compared to the last week, while the Milanka Price Index (MPI) was up by 98.3 points or 5.0% to close at 2061.4 points.

JKH remained the hot pick this week as the counter traded 4.0 million shares, adding closer to 25% or Rs.306.1 million towards week’s turnover amidst a string of crossings. JKH saw its share price rise by 8.3% during the week, to close at Rs.78.00 per share, while trading at a high of Rs.78.75 and a low of Rs.72.50 per share.

Following closely was the banking counter, NDB, the second highest contributor towards turnover this week amounting to Rs.292.6 million. NDB too witnessed a number of crossings taking place during the week with bulk arising on Tuesday. The share price ended flat WoW to close on Friday at Rs.93.00 per share. During the week the counter was seen trading at a low of Rs.91.00 per share and a high of Rs.97.00 per share. Approximately 3.2 million shares of NDB traded this week. Together with blue chip JKH, NDB accounted for 48.7% of this week’s market turnover.

Notable quantities of Ceylon Tobacco shares were seen trading this week, with the most part being traded on Tuesday and Wednesday. The share contributed Rs.51.2 million towards turnover, becoming the third highest contributor towards total turnover for the week. The counter traded within a wide range of Rs.115.00 and Rs.123.00 per share to close the week at Rs.116.00 per share, up by 0.9% WoW while trading 0.4 million shares.

By week’s close on Friday, Chevron shares were up 1.7%, on a volume of 0.4 million shares. The lowest traded price for Chevron during the week was Rs.116.00 per share, while the highest traded price stood at Rs.118.25 per share, while the counter contributed Rs.48.8 million towards week’s turnover.

The market saw high activity this week with the total turnover increasing by 145.3% compared to previous week to Rs.1.2 billion. The improvement in activity was helped largely by JKH & NDB crossings while retail participation also stood healthy. Meanwhile the average daily turnover amounted to Rs.307.2 million for the week.

Foreign participation as a percentage of total activity improved slightly this week to 22.2%, compared to 18.2% posted last week. Both foreign purchases and sales showed improvements this week. Foreign purchases improved by a sizable 213.7% to stand at Rs.194.8 million, while foreign sales rose by 191.8% to total Rs.351.3 million for the week. The resultant net foreign outflow amounted to Rs.156.5 million.

The most traded stocks during the week apart from the most sought after stocks JKH and NDB were Piramal Glass, Reefcomber, Dialog and Cargills.

In their point of view Acuity indicated that as expected by them, the market gained further during the week as investors continued to pick undervalued stocks. During the week All Share Price Index (ASPI) gained by 3.1% on improved activity levels.

Acuity indicated that they do not expect a major shift in the market sentiment over the coming week, thus the overall trend is likely to remain positive. However they feel some investors would look to take profits after weeks of healthy gains causing volatility in indices. Furthermore the activity levels could improve further next week as more investors look to enter the market in the back of falling interest rates.

In their Economic Update Acuity indicated that in view of the potential risks on real sector amid considerable decline in private sector credit expansion, the Central Bank has gradually eased its monetary policy stance since the beginning of 2009. The key policy signal rate of the Central Bank, the penal rate charged on Reverse Repurchase facilities has been reduced by 600 basis points since the beginning of this year to 13% at present. Following the policy rate signals the T’bill rates in the primary market have dropped considerably over the past few weeks. The 12-month T’bill rate has dropped by 530 basis points from 19% levels prevailed at the beginning of the year .

The declining rates have a direct positive impact on the stock market as investors who were attracted to high yields provided by fixed income investments return to equities. Especially the activity levels Acuity believe are likely to improve going forward as institutional investors enter the market. Nonetheless, for the listed companies to benefit from falling rates the lending rates need to come down. Prime Lending Rate (PLR) still hovers around 18% - 19% levels. Therefore the benefit from a corporate earnings angle would only come once the policy rate reductions trickle down to lower lending rates in the medium term.

- Asian Tribune -