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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2829

Market resilient through uncertainties

By Quintus Perera – Asian Tribune

Colombo, 03 December, ( The HNB Stockbrokers in the weekly share market review indicates that the Market regained its upbeat after a slow down witnessed last week. The All Share Price Index (ASPI) reached new heights during this week closing at an all time high of 2789.8. ASPI during the week grew by 105.9 points representing a 3.95 percent growth Week on Week (WoW).

Meanwhile the more sensitive Milanka Price Index (MPI) grew by 200.9 points to close the week at 3594.3 points. Despite a suicide bomb blast in Colombo targeting the Country’s defense secretary, ASPI managed to gain 12.05 points on Friday undeterred by macro uncertainties.

Banks were in the spot light this week with the largest private commercial bank in the Country, Commercial Bank of Ceylon witnessing 6.5 million of its shares changing hands on Wednesday at a price of Rs195 per share. During the week 6.85 million shares of Commercial Bank traded with a total turnover of Rs.1.33 billion thereby becoming the largest contributor towards weekly turnover. The counter traded at a high of Rs.192.5 and a low of Rs.180 during the week closing at Rs.191.75.

NDB also remained among the focus of the investors this week while a stake of 3 million shares was seen trading on Wednesday at a price of Rs.201 per share. The counter managed a turnover of Rs.741.2 million with a total of 3.68 million shares trading for the week. NDB traded at a high of Rs204 and a low of Rs.198 during the week, whereas it closed the week at Rs.202 per share.

JKH also witnessed 2.99 million of it’s shares trading during the week contributing Rs.570.8 million towards weekly turnover. The counter during the week traded within a thing margin of Rs.187 and Rs.192 while closing at Rs.192, marginally up by one Rupee compared to the previous week’s closing.

Kalani Cables a dominant player in the cable industry became the highest gainer for the week as it managed a 26 percent growth WoW, backed by strong financial performance for the first half of FY2006. Kalani Cables contributed Rs.94 million to the weekly turnover reaching a high of Rs.156 and a low of Rs.117 while closing the week at Rs.151.25 per share. ACL Cables the parent company of Kalani also saw its share price moving up by 18.6 percent WoW. ACL managed a turnover of Rs.246.4 million for the week while trading at a range of Rs.179 and Rs.215 per share. The Counter closed the week at Rs.213.25 per share.

Mobile telecom giant Dialog was also among the top gainers for the week, with the counter reaching a high of Rs.29.75 during this week. The counter contributed Rs.212.8 million towards weekly turnover while gaining 14 percent to close the week at Rs.27.75 per share.

Activity levels picked up this week as market turnover amounted to Rs.5.3 billion showing a 65.3 percent growth compared to Rs.3.2 billion posted for last week. Average daily turnover for this week stood at Rs.1.06 billion. Foreign investors remained net buyer amounting to Rs.256.7 million this week, while foreign participation improved to 39 percent of total activity compared to 25 percent recorded for last week.

Foreign purchases for the week stood at Rs.2.2 billion, a mammoth 444 percent increase from last week while foreign sales also witnessed an increase of 63 percent to stand at Rs.1.9 billion. Among heavily traded stocks for the week were SLT, Sierra, Dialog, Commercial Bank and Tokyo Cement (Non Voting).

In their point of view the HNB Stockbrokers indicated that market would remain resilient and the positive trend continued in the market with both indices reaching an all time highs. The interest on selected sectors kept the market moving on high volumes. ASPI gained by 3.95 percent during the week while the liquid MPI gained by 5.6 percent.

Market undisturbed amid negative peace signals

LTTE leader Velupillai Prabakaran stated that LTTE has no option but to push for an independent state, on his hero’s day speech on Monday, despite which the market remained resilient growing at a steady pace during the week. Furthermore an attempt to assassinate the country’s defense secretary on Friday, failed as he managed to escape from a suicide bomb attack in Colombo.

The incident resulted in a bit of initial panic selling, nevertheless the indices managed to bounce back during the day’s trading. Therefore considering resilience shown by the market in recent times, we expect the market to remain strong even with somewhat negative signals from the peace front.

Inflation hits record highs; hits 12.7 percent in November

The average annual inflation increased to 12.7 percent in November compared to 11.8 percent in October mainly due to the high price increases in vegetables as a result of adverse weather conditions.

Furthermore the point-to-point inflation shot up to 19.8 percent in November, highest in 10 years. In our opinion of HNB Stockbrokers, inflation is likely to climb further mainly due to the high demand during the festive season in December. Thus in their opinion CCPI annual average inflation is likely to hit 13.6 percent in 2006 (December), the highest in almost 5 years.

At the moment inflation at 12.7 percent and 12-month Treasury bill rate standing at 12.58 percent, the economy is experiencing negative real returns which could attract more funds to the stock market in order to derive higher returns.

HNB Stockbrokers feel that the rocketing inflation would force the monetary board to re look at the policy rates in order to mop up the excess liquidity in the system. However taking in to account the current monetary board’s policy of fostering growth in the economy, they do not expect a sharp increase in policy rates in the short term. Thus HNB Stockbrokers believe that negative real returns will continue to prevail in the economy in the short to medium term.

Look for undervalued stocks

They do not expect a major shift in the market sentiment, thus both the indices are likely to continue on the positive trend during the coming week. However HNB Stockbrokers do not rule out the possibilities of volatility in a narrow range due to profit taking by investors. The HNB Stockbrokers advise investors to search for undervalued counters in the market place such as Durdans, Hemas, ACL Cables and Aitken Spence while capitalizing on trading opportunities.

Furthermore they advise investors to take profits at regular intervals.

- Asian Tribune -

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