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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2640

Market sentiments propped up on possible union of main parties, though a jolt felt due to recent fighting

By Quintus Perera – Asian Tribune

Colombo, 15 October, (Asiantribune.com): The upbeat momentum witnessed during the past two weeks has been dampened due to the heavy fighting in the North and East during the week, though the market started off on a high note on Monday, HNB Stockbrokers indicated in their weekly review of the share market for the week.

The fresh hostilities between the government forces and the LTTE crumbled peace hopes with many being skeptical as to whether the scheduled peace talks between the two parties would be held as planed. Nevertheless positive news on a possible union between the government and the main opposition party the UNP cushioned the fall in indices to an extent and left indices inching upwards on Thursday and Friday.

Comparing Week on Week (WoW) the All share Price Index (ASPI) rose by 15.6 points to close at 2470.9 points, while the Milanka Price Index (MPI) improved by a higher 34.2 points to close at 3149.4 points.

Blue-chip counters took the forefront this week in terms of contributions towards weekly turnover with JKH leading the way. Similar to what was witnessed last week, JKH managed to become the highest contributor towards weekly turnover contributing Rs.551.8 million. Approximately 3.8 million of JKH shares traded this week amid increased foreign interest being witnessed on the counter. The share price rose slightly by 1.4 percent compared to last week, to close at Rs.144.50 per share on Friday, while managing to hit a high of Rs.147 per share this week.

Foreign interest retained on Lanka IOC this week, with 9.5 million of its shares trading and with the counter becoming the second highest contributor towards the week’s turnover. While prices rose to touch a high of Rs.33.50 per share this week, prices closed slightly lower at Rs.32 per share for the week. A delay has been witnessed with regard to the signing of the agreement between LIOC and the government on the subsidy issue, with officials at Lanka IOC stating at a press conference on Tuesday that the signing would take place in another one to two weeks. LIOC shares contributed Rs.306.4 million towards turnover for the week.

Distilleries came among the top gainers for the week, with its share price appreciating by 10 percent to close at Rs.60.75 per share this week. The share traded between a range of Rs.61.25
and Rs.55.50 per share, while contributing Rs.169 million towards weekly turnover. Approximately 2.9 million of Distilleries counters traded up from 2.3 million of shares traded during last week.

Renewed investor interest was observed on the Sampath bank counter, with its share price rising by 14.3 percent WoW becoming the second highest gainers for the week. The counter closed the week at Rs.109.75 per share, while trading at a high of Rs.112 per share and a low of Rs.95.50 per share for the week. Contribution towards weekly turnover amounted to Rs.34.1 million, with 0.3 million shares trading for the week.

Total turnover stood at Rs.2.1 billion while the average daily turnover amounted to Rs.427.8 million for the week. Looking at average daily turnover levels WoW the turnover this week was down slightly by 6.1 percent compared to last week.

Foreign participation picked up this week to 33.6 percent amid interest being witnessed in several blue-chip counters. Foreign investors were net buyers amounting to Rs.281.8 million for the week. For the week foreign purchases stood at Rs.858.5 million while foreign sales totaled Rs.576.7 million.

Sierra Cables, LIOC, Nawaloka , JKH and Tokyo Cement (Non Voting ) were amongst the highest traded stocks this week.

Meanwhile HNB Stockbrokers in their point of view indicted witnessing heavy volatility in the market amid mixed news that came in from the macro front. Nevertheless market managed to keep the positive trend going for yet another week as investors managed to keep their hopes alive on the recommencement of the peace process. During the week market gained 15.6 points compared to previous week.

No change to policy rates

The October Monetary Review held the policy rates unchanged at 9.625 percent, despite the rising inflation in the economy. In their opinion inflation is likely to climb further in the short term, as rupee depreciation witnessed during the past few weeks resulting in imported goods becoming more expensive.

The rupee depreciated 3.2 percent compared to US dollar during last
month alone and well set to achieve our year-end target of Rs.107. Therefore considering the high inflation and negative real returns we expect the policy rate to be increased further in the short to medium term.

The UNP and Government is likely to sign an MOU in two weeks time

The much anticipated talks between President Mahinda Rajapaksa and the United National Party (UNP) leader Ranil Wickramasinghe ended positively on Thursday with the two parties likely to sign a Memorandum of Understanding (MoU) within two weeks time.

Upon the signing of the MoU the country’s two major parties are likely to work together on key national issues which the HNB Stockbrokers believe would provide much needed political stability in finding a practical solution to the North and East conflict and in achieving a broader economic growth.

During the week, peace hopes were shaken by an unexpected clash between the Sri Lankan Army and LTTE in the Northern part of the Country, which saw the market slide marginally on Wednesday. However, with the Government and LTTE reaffirming their commitment to go ahead with peace talks, the market managed to continue it’s positive momentum during the last two days of the week.

Market to remain volatile

HNB Stockbrokers expect the overall market sentiment to remain mixed in the coming week with profit taking likely to put pressure on indices. However they feel that the market will continue on its positive trend with peace talks being the main driver. Therefore any adverse developments with regard to peace talks scheduled for end October could have a major impact on the market momentum. Thus HNB Stockbrokers advise investors to look for undervalued stocks with strong fundamentals and to take profits at regular intervals.

- Asian Tribune -

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