Bourse loses grip as investors adopt a cautious approach
Monday, 26 August 2013 00:00
-
- {{hitsCtrl.values.hits}}
Asia Wealth Management said cautious investor approach amidst a weakening Sri Lankan rupee and lower than expected corporate earnings in 2QCY2013, crippled market sentiments dragging down the indices towards the negative territory.
“The benchmark index fell below its 6,000 mark on Friday whilst counters witnessed across the board dips throughout the short week. Daily activities were predominantly energised by crossings witnessed on selected blue chips whilst retailers picked on the penny stocks,” Asia said.
It also said the Colombo bourse headed south throughout the week with both the indices losing sharply paring the gains made during last week. Meanwhile, the bench mark ASI fell below the 6,000 mark on Friday, whilst both the indices plunged more than 2% during the day due to the price dips witnessed across the board led by few large cap counters.
Food Beverage and Tobacco sector counters Ceylon Tobacco and Nestle Lanka which witnessed foreign and institutional participation over the recent past lost 19% and 14% WoW respectively during the week, however registering YTD return of 52% and 48%. Despite the indices losing momentum, large scale transactions that dominated the week’s activities pushed the week’s turnover level recording an average weekly turnover of Rs. 928.8 million, an increase of 17% WoW. Mixed corporate earnings for 2QCY2013, continuous fall in the Sri Lanka rupee (which depreciated c. 0.6% WoW) and the news on foreign funds gradually pulling out of the regional markets in favour of developed markets such as the US would have possibly caused the investors to adopt a cautious approach as the bourse witnessed heavy selling across the board. Further, the external data released by the CBSL yesterday indicated that the import expenditures witnessed a faster growth (15.3% YoY) than export earnings (6.8% YoY) for the month of June resulting in widening of trade deficits.
Further, the regional markets and currencies also witnessed steep dips during the week, due to funds pulling out of these markets (which have been witnessing a slowdown in their economies), in favour of the US which has showed signs of recovery. This was triggered subsequent to the Federal Reserve’s July meeting minutes which indicated a possible tapering of the stimulus. However, the emerging markets gradually picked up during Friday’s trading subsequent to the positive economic indicators that came in from the US, China and Europe.
Meanwhile, the Colombo bourse witnessed a net foreign inflow during the week with a WoW increase of 3%. Investor participation has been persisting on Sri Lankan equity market presumably due to the relatively higher growth prospects of the Sri Lankan economy cf. regional peers and the strong growth profiles posted by selected listed companies. However, continuous fall in the Sri Lankan rupee will remain a challenge to the companies that are largely depending on imported raw materials for their production, whilst it would favour companies who earn revenue in US dollars, Asia Wealth Management added.
