Bullish retailers take a ‘well-deserved breather’

• 10-day rally checkmated by profit taking on Rs. 2 b turnover; buying returns at tail-end

Retailers, who staged a dramatic bull run in recent weeks, propelling indices to rise by over 10%, yesterday took what one broker described as a “well-deserved breather” as profit taking ruled the Colombo Bourse.

The ASI after a momentary rise in early morning trade going above 5,600 points, dipped sharply by 50 points as investors took profit from appreciated price levels. Signs of buying returning to the market were evident as the benchmark index closed almost flat or below two points. The active MPI dipped by 0.6%, thereby returning to negative after turning positive on Monday following a lapse of 17 months.

Since 24 August, when news that Dr. Nalaka Godahewa would be appointed as Chairman of the SEC broke out, the ASI had risen by 580 points or 11.5% until Monday and the MPI by 612 points or 13%. The market’s value was up by Rs. 221 billion as it set some new records in terms of activity, largely on improved investor sentiments.

Reuters said yesterday that the rally pushed the Bourse to an overbought region on 28 August. Thomson Reuters data showed the 14-day Relative Strength Index on Tuesday was at 89.776, well above the upper neutral range of 70.

“The market took a well-deserved breather with the ASPI closing flat at 5,591 after having rallied during the past few days. Profit taking was evident in several blue chip counters with the MPI declining by 0.6% to close at 5220,” DNH Financial said yesterday.

Asia Wealth Management agreed, when it said: “The Colombo Bourse took a breather towards a correction where both indices nosedived to close in red, after galloping for 10 consecutive days.”

Within the period the benchmark ASI gained 10.2%, offering hefty gains while curing the wounds of investors. Despite the volatility witnessed during the day, very strong activities were seen registering a turnover close upon Rs. 2 billion, whilst the number of trades recorded was over 29,000.

“The market was due for a slowdown after the rapid rise in share prices over the last two weeks. A period of consolidation is required to sustain the current bull run. The Bourse saw indices fluctuating with the ASPI breaching the 5,600 mark early in the day, only to lose ground heavily during midday. The ASPI recovered later in the day. The MPI was dragged down due to index heavy John Keells Holdings losing ground,” NDB Stockbrokers added.

Heavy trading on HVA Foods (Rs. 194.2 million), Serendib Hotels (Rs. 154.6 million), Citrus Leisure (Rs. 146 million), and Pan Asia Bank (Rs. 83.6 million) boosted turnover.

Softlogic Stockbrokers said the S&P SL20 index secured a marginal gain of 7.5 points to close at 3,034 points with price appreciations in solid stocks including Cargills (Ceylon)(+5.2%), Sri Lanka Telecom (+2.8%),  Commercial Bank (non-voting) (+2.9%), DFCC Bank (+1.3%) and Chevron Lubricants (+0.7%).

A few more quality stocks, including People’s Leasing, Distilleries, Vallibel One, Sampath Bank and Commercial Bank of Ceylon (voting), extended interest. Ceylon Grain Elevators, Dankotuwa Porcelain, Environmental Resources Investment, The Colombo Fort Land & Building, Colombo Land & Developments, Freelanka Capital Holdings, East West Properties, Lanka Hospitals Corporation and Chilaw Finance continued to be chased after by the retail and high net worth investors.

It said the drop in MPI was primarily attributed to losses made in John Keells Holdings (-1.7%), PC House (-4.8%), Union Bank (-3.3%), Expolanka Holdings (-1.3%), Lanka Orix Finance (-2.0%) and Brown & Co. (-3.7%).

Commercial Bank non-voting saw foreign accumulation during the day, according to NDBS.

NDBS said the Hotels and Travels sector emerged as the top contributor to the market turnover (due to Serendib Hotels and Citrus Leisure) and the sector index lost 0.62%. The share price of Serendib Hotels gained Rs. 1.40 (6.06%) to close at Rs. 24.50, while the share price of Citrus Leisure surged Rs. 2.30 (7.32%) to close at Rs. 33.70.

The Banking, Finance and Insurance sector became the second highest contributor to market turnover (Pan Asia Bank and Commercial Bank non-voting) and the sector index lost 0.89%. The share price of Pan Asia Bank shed Rs. 0.40 (1.96%) to close at Rs. 20 while the share price of Commercial Bank nonvoting gained Rs. 3.70 (4.24%) to close at Rs. 91. Foreign Holdings of Pan Asia Bank and Commercial Bank increased by 2,992,000 shares and 647,010 shares respectively.

“HVA Foods continued to dominate the market being the highest contributor to turnover with its share price gaining Rs. 1.10 (6.21%) to close at Rs. 18.80,” NDB Stockbrokers said.