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Asian Tribune is published by E-LANKA MEDIA(PVT)Ltd. Vol. 20 No. 76

Profit taking slowed down the Market

By Quintus Perera – Asian Tribune

Acuity – HNB Stockbrokers Research in their market review indicated that market slowed down this week as profit taking by investors during the first four trading days eroded some of the gains from last week’s strong rally.

However the bourse returned to its bullish trend on Friday as blue-chips coupled with retail interest on mid cap counters lifted market momentum. Week on Week (WoW) the All Share Price Index (ASPI) declined by a marginal 0.2% or 4.8 points to close the week at 2452.0 points, while the Milanka Price Index (MPI) dipped by 1.4% or 37.4 points to close at 2727.5 points.

For the fourth consecutive week, JKH took the lead in terms of turnover as the counter injected Rs.336.8 million to the week’s market turnover (Representing 9.8% of total weekly turnover). Despite high activity, JKH share closed Rs.2.00 or 1.5% lower at Rs.136.00 for the week on Friday. In total JKH traded 2.5 million shares for the week within a range of Rs.132.75 and Rs.141.00 per share with largest portion of shares trading on Monday.

Banking counter Sampath meanwhile saw 2.8 million shares trading for the week contributing Rs.306.1 million towards this week’s turnover. The counter showed a 3.7% decline in share price to close the week at Rs.110.75 per share, while trading at a high of Rs.117.00 and a low of Rs.110.25 per share for the week. Few large crossings on Sampath were seen on Tuesday, with selling party being foreign.

Kotmale Holdings (LAMB) emerged this week’s third largest contributed stock with a large deal going through on Thursday. A stake of 29.9% of LAMB consisting 9.4 million shares switched hands at a price of Rs.22.00 per share on Thursday, which was bought by Kshatriya Holdings through its subsidiary First Capital Holdings PLC. The LAMB price appreciated by 2.0% WoW to close at Rs.12.75 per share with 11.8 million shares trading for the week while making a Rs.240.4 million contribution to turnover.

Renewed interest was seen on Ceylinco Insurance (CINS) shares this week with share price appreciating by a notable 8.1% to close at Rs.174.00 per share. CINS saw 0.9 million of its shares trading for the week contributing Rs.156.7 million towards weekly turnover. Share price of CINS traded between a wide price band of Rs.161.00 and Rs.175.00 per share during the week.

Total market turnover for the week moderated to 3.4 billion this week compared to Rs.6.8 billion recorded last week. The average daily turnover for the week amounted to Rs.684.8 million, which was a 49.4% reduction from Rs.1.4 billion witnessed last week.

Foreign participation remained low this week standing at 18.8% of total activity compared to 36.8% last week. Both foreign purchases and foreign sales were below levels witnessed during last week. Foreign purchases for the week amounted to Rs.569.0 million, while foreign sales stood at Rs.715.1 dominated by foreign selling on Sampath Tuesday. As a result the net foreign outflow this week amounted to Rs.146.1 million.

Kotmale Holdings, Nawaloka, Piramal Glass, Marawila Resorts, Eden Hotel Lanka were among the highest traded stocks for the week.

In their point of view Acuity indicated that profit taking ahead of month-end settlements disturbed market momentum this week with indices losing ground during the first four days. However, Week on Week ASPI closed flat amidst strong gains on Friday.

They expect the market to regain momentum over the coming week with improved activity levels as investors come in fresh after a week of profit taking. Although the crucial IMF loan has seen procedural delays, the expectations of post-war growth prospects drawing more foreign investments we believe will keep the market upbeat. Further, as Acuity mentioned last week the market is poised for a possible re-rating and to sustain the same on improved sentiment given the absence of war situation. Therefore, we advise the investors to collect fundamentally sound stocks with a medium to long-term view.

In their Economic Update Acuity indicated that Sri Lanka’s external trade activity continued the downturn for yet another month with both exports and imports showing sharp declines in April. However, the steeper drop in imports lead to a sizeable 76% YoY improvement in trade gap compared to same month last year.

In April, exports dropped 28% YoY to US$ 438 million with all sub-segments recording negative growth. Agricultural exports plunged 41% YoY to US$ 86 million during the month with the major category Tea falling 44% YoY. Though tea prices have recovered to almost last year’s levels, export volumes continue to disappoint amidst lower demand.

Meanwhile, industrial exports declined 24% YoY to US$ 347 million. Textiles and garments fell 10% YoY during the month owing to cancelled and postponed orders. Imports meanwhile witnessed a steeper drop of 54% during the month to US$ 604 million reflecting lower import prices and sluggish demand for imports amidst slowing economic activity. Expenditure on consumer goods fell 48% to US$ 116 million while investment goods plunged 44% YoY to US$ 127 million. Intermediate goods meanwhile slumped 58%YoY to US$ 349 million spearheaded by a 70% decline in oil bill to US$ 122 million.

On a cumulative basis exports have plunged 16% YoY to US$ 2.1 billion during the first four months (Jan-Apr). Cumulative imports during the period, however, declined by 37% to US$ 2.8 billion, resulting in a trade gap of US$ 806 million, down 62% YoY. Although declined marginally private remittances have been more than enough to cover the trade gap so far this year.

Up to April private remittances totaled US$ 1.03 billion, down by 1.3% YoY compared to last year, yet providing an excess of US$ 228 million over the trade gap. Meanwhile, the Gross Official Reserves recorded US$ 1.3 billion by the end of April, which were sufficient to finance 1.2 months of imports. Nevertheless, since the beginning of May Central Bank has absorbed US$ 367 million (Up to 19 Jun) in its attempt to build the reserves position to a more comfortable level while preventing the rupee from appreciating further.

Asian Tribune

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