Aitken Spence draws biggest foreign buying as net inflow tops Rs. 1 b

The Colombo Bourse last week saw a net foreign inflow of Rs. 1.2 billion, with Aitken Spence Plc drawing the most buying, whilst brokers expect the non-national interest to grow further.

Spence saw net foreign shareholding increase by 4.8 million shares or 1% last week, whilst overall nearly five million of its shares traded for Rs. 571.5 million.

The bulk of the trading took place on Thursday with foreign buying amounting to Rs. 516 million.

Interestingly EPF was the major seller amounting to nearly Rs. 340 million whilst National Equity Fund too was on the selling side. Despite the sale, EPF remains a major shareholder in Spence with a 7.35% stake or 29.8 million shares as at end 2011.

Among buyers of Spence were Aberdeen funds, which as at end 2011 were holding a 9.7% stake.

Spence subsidiary Aitken Spence Hotel Holdings also figured among foreigners’ favourites on Friday, drawing over Rs. 110 million of buying.

Friday’s overall net inflow of Rs. 122.7 million brought the week’s total to Rs. 1.2 billion and the year-to-date figure to Rs. 2.94 billion.

Given the fact that the Colombo Bourse had seen net outflows during the past three years, the current net inflow trend has boosted investor and broker sentiments.

Among other stocks picked by foreigners last week were JKH, Tokyo Cement (two million shares) and Chevron, whilst interestingly Royal Ceramics too drew foreign buying.

Arrenga Capital said foreign buying had brought back some of the lost confidence in the market.

Asia Wealth Management said foreign investors were booking bulk stakes in selected counters. It said foreign investor interest had been “inspirational for local institutional investors to be active again, whom were previously lagging behind in the absence of foreign impulse”.

“According to our belief, now the market is promising for investors, which earlier went through a turbulent correction. Therefore, we see investors are more in the mode of accumulating shares at substantial discounts. It is important to note that foreign investors are not intending to earn a quick profit and exit the market; rather they would seek for long standing investments in counters with immense potential. Goldman Sachs buying into Rs. 1 b Commercial Bank shares is one fine example to this,” Asia said.

It is also noted that the currently depreciating local currency would give way for foreign investors to enter the market, even with expectations for the currency to further depreciate.

“A depreciating exchange rate would not affect foreigners with big foreign portfolios, a reason being well diversified portfolios would be robust to diversify currency risk as well, hence a un- hedged position in the Sri Lankan secondary market would not pose huge risks for a big foreign portfolios,” Asia Wealth added.

DNH Financial said pick up in net foreign purchases was significant despite the rhetoric of some commentators that foreign investors have been ‘exiting’ the market.

“Encouraged by a weaker rupee and healthy corporate results in blue chip stocks, foreign portfolio investors appear to be cherry picking fundamentally strong value and growth stocks that are likely to outperform on a consistent basis with relatively lower earnings and price volatility,” it said.

“Taking into consideration the medium to longer term investment horizon of FIIs, we believe that foreign buying in domestic equities will accelerate this year but on a highly selective basis,” DNH added.