Bourse marks 7 days of decline; foreigners net buyers

• Asia Securities says investors have already priced in for austerity measures to a large degree at current levels
• Announces reforms would provide long-term opportunities in selected stocks that have hit decade lows, especially stocks with higher export exposure and dollar earning capacity
• First Capital says investor sentiment negatively struck with tax reforms introduced on Tuesday

The Colombo bourse marked its seventh consecutive day of decline as locals remained bearish but foreigners continued to be net buyers. 

On a day of lacklustre activity, the active S&P SL20 index declined by 0.9% and the benchmark ASPI was down by 0.5%. Turnover was only Rs. 1.2 billion involving 77 million shares.

Asia Securities said indices managed to recover from day’s low whilst investors maintained more focus on stock selection following expected austerity measures. First Capital opined investor sentiment was struck by new tax reforms.

Asia said the indices staged a mid-day recovery from an early decline as retail and HNI investors maintained more focus on stock selection, following the tax reforms announced late Tuesday. 

“With the ASPI falling 40% since its peak recorded in February 2022, it is our view that investors have already priced in for austerity measures to a large degree at current levels, and the announced reforms would provide long-term opportunities in selected stocks that have hit decade lows, especially stocks with higher export exposure and dollar earning capacity,” Asia said. 

It said following a bout of panic selling, retail and HNI investors gradually returned to the buying side in the second of the session and positioned themselves in active counters at relatively lowers. The ASPI touched an intra-day low of 8,001 (107 points) and recovered to 8,103 in the second half of the session before settling at 8,065 (43 points). 

Turnover came in at Rs. 1,215 million (previous session Rs. 1,623 million) on the back of activity in BIL (Rs. 311 million), EXPO (Rs. 207 million), and LOLC (Rs. 66 million). 

It said net foreign inflow continued for the third consecutive session (Rs. 20 million) led by net buying in CARG (Rs. 25 million), and HNB (Rs. 15.7 million). Overall, 61 stocks ended with price gains while 126 settled with losses.

First Capital said the Bourse closed in red for the seventh consecutive session as investor sentiment was negatively struck with the tax reforms introduced on Tuesday which are to be implemented in the immediate and near term typically by increasing VAT rates, income tax rates and corporate tax rates. 

“As a result, the index set on a downtrend with significant volatility as the market opened. Subsequently, a recovery was witnessed as investors bargain hunted on several counters but failed to recover the losses and closed for the day at 8,065 losing 43 points,” First Capital added. 

It said turnover was recorded lower compared to previous session with the highest contribution of 32% from the Food, Beverage and Tobacco sector followed by the Transportation sector amounting for a contribution of 17%. 

NDB Securities said indices closed in red as a result of price losses in counters such as Expolanka Holdings, Commercial Bank and DFCC Bank.

It said high net worth and institutional investor participation was noted in Cargills and Aitken Spence. Mixed interest was observed in Expolanka Holdings, LOLC Holdings and Lanka IOC whilst retail interest was noted in Browns Investments, SMB Leasing nonvoting and LOLC Finance.

Food, Beverage and Tobacco sector was the top contributor to the market turnover (due to Browns Investments) whilst the sector index gained 0.39%. The share price of Browns Investments decreased by 10 cents to close at Rs. 9.90.

Transportation sector was the second-highest contributor to the market turnover (due to Expolanka Holdings) whilst the sector index decreased by 2.55%. The share price of Expolanka Holdings lost Rs. 5.50 (2.54%) to close at Rs. 210.75.

LOLC Holdings, Lanka IOC and LOLC Finance were also included among the top turnover contributors. The share price of LOLC Holdings moved up by Rs. 3.75 (0.63%) to close at Rs. 601.75. The share price of Lanka IOC recorded a gain of Rs. 3.80 (6.82%) to close at Rs. 59.50. The share price of LOLC Finance declined by 20 cents (2.25%) to close at Rs. 8.70.