Bourse rebounds on fresh buying spree

• Market’s value up Rs. 23 b, ASI back again in 5,000-points level

The Colombo stock market produced a confident rebound yesterday driven by high net worth investors as well as institutions picking up low valued opportunities.

The market’s value rose by Rs. 23 billion, slightly lower than Friday’s gain of Rs. 26 billion. The rise of 1.2% by the benchmark ASI was good enough for it reach a four-week high. The ASI managed to surpass the 5,000 point level after gaining 61 points.   

Yesterday also marked the fifth straight session of gain, with analysts linking it to investors seeing greater value after the Bourse had slipped by 17% until Monday and Price Earnings Ratio having dipped to 13 times, almost half from what it was a year ago. Turnover crossed the half a billion mark, up from Rs. 295 million on Monday.

NDB Stockbrokers said market continued its upbeat as interest continued across the board.

“High net worth and institutional activity was witnessed in Hayleys while further accumulation was seen in fundamentally sound counters such as Commercial Bank (Voting, Carson and John Keells Holdings,” NDBS said.

Daily FT learns buyer of 98,600 Hayleys shares was Arc Capital with Ajith Devasurendra as the seller.

Softlogic Stockbrokers (formerly Arrenga Capital) said release of the healthy economic growth numbers for 1Q2012, assisted to uplift the investor confidence as the overall participatory levels showed considerable improvement.

“Reactivation of retailers in specific added to the improvement in the Bourse’s activity levels,” it said adding nearly four shares gained for each one that dropped.

Index heavy; Cargills (Ceylon) (+5.3%), Hatton National Bank (+1.9), Ceylon Tobacco (+0.8%), Access Engineering (+5.5%) & Asian Hotels & Properties (+2.8%) were the biggest positive contributors to the index gains.

Strong renewed retail and high net worth play in speculative favourite, HVA Foods, saw the counter to lead the day’s turnover list with around 9.5% (Rs. 50.6 million) contribution. The counter touched a high of Rs. 13.4, before closing at Rs. 12.8 with a gain of 18.6%.

Similar interest was evident in PC House and its related entity, PC Pharma, as both the counters witnessed several large trades on board. PC House closed with a notable 14.5% gain at Rs. 7.

The day’s only crossing was recorded in conglomerate, Hayleys, as the counter saw a block of 98,600 shares done at Rs. 330 each. Furthermore, accumulation was observed in Commercial Bank of Ceylon, John Keells Holdings, Aitken Spence and Vallibel One.

Despite being attractively priced, selling pressure extended in manufacturing sector player, Royal Ceramics, as the counter continued to trade on its 52-week low of Rs. 90. Nevertheless, some buying interest in the counter during final hours of trading pushed the share to close with a 4.3% gain at Rs. 92.60, still trading at a deep discount. Interest persisted in Carsons Cumberbatch.

Softlogic Capital said Sri Lankan equity, currently being Asia’s worst performer, now ranks fourth in terms of the world’s least performing stock markets being, just ahead of Greece with an YTD dip of -16.7%.

“With the positive news flowing from the macroeconomic arena coupled with the long prevailed bearish run which dragged the indices to a highly competitive valuation platform amongst other emerging markets, we believe that the Colombo Bourse is all ready for a strong recovery provided interest and exchange rates also gradually ease. We continue to remind the value hunters to stick to the steady lot as we expect them to outrun the market in a recovery,” the Softlogic Equity Research team said.

Reuters too confirmed that market rose as investors picked up battered blue chip stocks. Government data on Monday showed improved economic growth in the first quarter year-on-year, but brokers said investors were still cautious amid uncertainty over interest rates and the volatile rupee exchange rate.

Data showed that the $59 billion economy grew at a faster than expected annual rate of 7.9 per cent in the first quarter of 2012, slowing from eight per cent in the same quarter last year.

The market fell 10.8 per cent in May, due mainly to economic and political worries. It has recovered 4.7 per cent so far in June.

Foreign investors were net sellers of Rs. 16.9 million worth of shares on Tuesday, but so far this year, they have been net buyers of Rs. 22.59 billion.