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Asian Tribune is published by E-LANKA MEDIA(PVT)Ltd. Vol. 20 No. 79

Indices dragged down

By Quintus Perera – Asian Tribune

Acuity – HNB Stockbrokers Research in their market review indicated that Colombo bourse dipped this week eroding gains made during the latter part of last week as poor earnings of some of the key high value companies resulted in dampened investor sentiment. The All Share Price Index (ASPI) lost 28.3 points or 1.1% at 2501.2 points while the more liquid Milanka Price Index (MPI) slid 74.1 points or 2.6% to close at 2816.7 points for the week.

Contributing with the largest portion to the week’s market turnover, Ceylino Insurance (CINS) recorded Rs.251.6 million on a trading volume of 1.1 million shares during the week. The counter witnessed a 8.1% improvement in its share price, which peaked at Rs.235.00 per share, before closing at Rs.229.50 for the week. Investor interest was seen on the counter throughout the week.

Nestle (NEST) became the second highest contributor towards the total market turnover this week with a turnover of Rs.129.4 million aided by a sizeable quantity of shares changing hands on Friday. Over the week 0.4 million shares of NEST traded within a highest price of Rs.360.00 and a lowest price of Rs.349.00 before closing a notable 39.4% higher at Rs.350.00 on Friday. Counter became the week’s top gainer.

Ranking in the third place was the banking stock Sampath with a total turnover of Rs.113.6 million. Sampath, which has seen its price rising over the past few weeks, appreciated by a further 7.0% during the week to close at Rs.137.00 on Friday. Over the week a total of 0.9 million Sampath shares changed hands.

JKH retained investor appetite with 0.7 million shares trading this week. The share price dipped Week on Week (WoW) by 3.3% to close the week at Rs.130.25 per share, while trading between the range of Rs.129.50 and Rs.135.00 per share. The counter contributed Rs.93.5 million towards weekly turnover becoming the fourth highest contributor.

Activity levels picked up by 26.3% during the week, with turnover amounting to Rs.1.7 billion, compared to holiday shortened last week. Meanwhile the average daily turnover for the week amounted to Rs.338.9 million.

Foreign participation for the week stood low at 10.8% till Thursday, however climbed to 23.3% by week’s close on Friday recording a noteworthy foreign inflow. Accordingly foreign investors became net buyers for the week, totaling Rs.119.3 million for the week resulting from foreign purchases of Rs.454.0 million and foreign sales of Rs.334.7 million.

Most traded stocks during the week were Dialog, Piramal Glass, Pelwatte, Nawaloka and Ceylinco Seylan.

In their weekly point of view Acuity indicated that disappointing 2Q earnings of some of the key high value companies dragged the indices down this week with ASPI declining 1.1% and MPI losing 2.6% on modest volumes.

With a majority of key companies having released their 2Q earnings, Acuity expect the market to stabilize in the weeks ahead. 2Q earnings as they expected have given mixed signals to the market, however, the investors they believe would look more positively towards the second half corporate earnings due to recent positive economic developments such as the decline in interest rates, higher business confidence and brightened growth prospects following the end of war.

Meanwhile, the foreign investors have been slow in entering the bourse, although government securities have seen a $270 million foreign inflow since the end of war according to Central Bank data. While this shows the prevalence of global risk averseness to some extent, it also seems to indicate foreigners’ confidence over stability of the rupee and the overall economy. However, with the outlook for corporate earnings improving on the back of political and economic stability Acuity expect the foreign investors to gradually enter equities which have given superior returns over longer periods.

In their Economic Update Acuity indicated that after sinking to US$ 1.3 billion in March Gross official reserves held by the Central Bank have recovered 71% to US$ 2.2 billion as of the end of July. Based on average imports for the latest available 12-month period (up to Jun), reserves were sufficient to finance about 2.3 months of imports.

In July the Central Bank received the first tranche of IMF US$ 2.6 billion standby arrangement amounting to approximately US$ 322 million. However, reserves had begun to strengthen even before the IMF loan with Central Bank becoming a net buyer in the forex market since April. According to official data Central Bank has absorbed nearly US$ 890 million (up to Aug 10) from the market since end March.

Meanwhile, foreign investments that flew-off from government securities amidst the global financial crisis are now seemed to be gradually returning. Post-war foreign inflows to government T’bills and T’bonds reached US$ 270 million by 10th August according to official data.

- Asian Tribune -

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