Brokers mixed over this week’s outlook for Bourse

Stock brokers are mixed over outlook for the Colombo Bourse this week despite some redeeming performance last week.

Thanks to return of buying and improved sentiments, last week saw the ASPI gain 67 points and the MPI gain 42 points. However, the overall market still remains sluggish.

“What the investor community does not realise is that a bear market would be the best point to start collecting fundamentally strong counters, since they are at attractive prices,” Asia Wealth Management said.

“What happens is that the investors try to get on the band-wagon of low cap speculative counters, and  invariably get burnt. Hence, investors have to be long term thinking and strategic. Thus, we advice the investors to look for value in fundamentally strong counters, and have a mid to long term tenure,” Asia added.

NDB Stockbrokers opined that the market is likely to remain dull due to the possible drop of prices of speculative stocks which gained last week.

Acuity Stockbrokers said renewed buying interest on select stocks together with investor interest in new entrants to the market halted a six week declining trend. Both indices had recorded a gain and sustained the momentum during the week’s trading.

“We expect the market to sustain its momentum while current market levels should attract buying interest ahead of the June earnings season, in selected stocks within key sectors such as Banking, Manufacturing, F&B which seem attractive on valuations at current prices. A significant amount of funds remain locked in private placements and IPOs at present and liquidity is expected to improve mid July aided by the IPO refunds flowing back into the bourse,” Acuity added.

Arrenga Capital in its weekly recap said previous week’s bearish sentiments which continued on Monday led the bourse register an all-time six month on Tuesday. However strategic deals on selected heavy index counters breathed into the market performance assisting ASPI to wrap up the week with a gain of 67.3 points WoW. A fresh round of buying was evident with force selling to meet credit clearing requirements coming to an end, where investors were seen collecting undervalued shares across the board. However, lack of liquidity with cash being locked up in IPO’s and private placements hampered activity levels taking the weekly volume levels below average.

Heavy weight John Keells Holdings topped the week’s turnover list contributing circa 20% to the weekly turnover after the subdivided shares initiated trading. The counter witnessed foreign institutional participation over the week registering a price gain of 2.4% to close the week at LKR210.0. Expolanka Holdings witnessed foreign interest whilst Commercial Bank saw renewed investor play backed by institutions. With Vallibel One initiating trading during the week, its subsidiary Royal Ceramics saw institutional participation with Vallibel Finance too proved to be an active counter on Thursday. Vallibel One, which initiated trading on Friday; emerged to be investor’s key focus with the counter registering a price gain of 22.8% with around 41.9 mn traded shares. The counter closed at LKR30.7 after reaching a high of LKR38.5.

Conglomerate, Carsons Cumberbatch through its subsidiary Good Hope Asia Holdings, acquired a 100% stake in Premium Nutrients Bhd, a specialty fats manufacturer with operations in Malaysia & India. This has been the company’s largest acquisition with investment totalling to LKR4.27 bn.

Lanka Orix Finance Company initiated trading on Thursday by way of an introduction (2.8 bn shares representing 10% holding). The counter which initiated with a reference price of LKR5.0 reached an intra-week high of LKR22.5 making the counter appear among top 20 most valuable stocks with market capitalisation of LKR63 bn on its initial day of trading. However, the counter lost grounds thereafter to close the week at LKR10.6. Abans Financial Services announced an issue of listed unsecured debentures to the value of LKR500mn.

Adding further, LKR1.2 bn worth IPO of Textured Jersey was oversubscribed on its opening day, whilst Softlogic Holdings announced that it would be initiating trading on 12.07.2011. The counter is to be listed under diversified holdings.