CSE rebounds with fresh interests in blue chips and speculative stocks

The Colombo Bourse bounced back sharply yesterday, energised by a fresh round of buying interest in both blue chips as well as second tier stocks.

The manner in which the Colombo Stock Exchange has been behaving of late – continuous foreign and institutional buying on blue chips and active play by retailers on low-value stocks with high net worth investors looking for selective counters – has been welcomed by most analysts and brokers. Those who are sceptical, however, continue to issue caution.

Be that as it may, the ASI gained by 1.4% or 77 points, the MPI by 1.7% or 89 points and the S&P SL 20 Index by 1.3% or 39 points yesterday.  As per Bloomberg data, during the month ended on 10 September, the Colombo Bourse was up 14.85%, placing the CSE as the third best performer, whilst the MSE Top 20 Index was down 10.84%. However, the ASI remains negative at 6.6%, but a massive improvement when compared with 20% dip by mid-July



Turnover yesterday was Rs. 1.2 billion, whilst 63 million shares were traded.

The top turnover generators were John Keells Holdings PLC (JKH), Environmental Resources Investments PLC (GREG), East West Properties PLC (EAST), Sampath Bank PLC (SAMP) and Dankotuwa Porcelain PLC (DPL).

NDB Stockbrokers said profit taking was witnessed to an extent in retail counters, while speculative counters such as Environmental Resources Investments, East West Properties and Dankotuwa Porcelain were seen dominating the turnover till mid day.

“Commercial Bank and John Keells Holdings kept the indices in the green, with the latter gradually accelerating to hit an intraday high of Rs. 210 to emerge as the highest contributor for the day,” it added.

“Buying interest re-emerged in the Colombo Bourse after a slow start followed by Tuesday’s downturn. Volatility remained high in the first hour as the Bourse dipped 10 points, before investors rushed in to take advantage of the bargain prices. A significant uptrend followed thereafter,” Softlogic Stockbrokers said.

NDBS said the Banking, Finance and Insurance sector was the top contributor to market turnover (Sampath Bank) and the sector index gained 2.28%. The share price of Sampath Bank gained Rs. 1 (0.49%) to close at Rs. 206.

The Diversified sector became the second highest contributor to the market turnover (John Keells Holdings) and the sector index surged 1.75%. The share price of John Keells Holdings accelerated by Rs. 6.90 (3.40%) to close at Rs. 209.90.

Environmental Resources, East West Properties and Dankotuwa Porcelain were also among the top contributors for the day. The share price of Environmental Resources closed flat at Rs. 17, while the share price of East West Properties gained Rs. 1.10 (5.73%) to close at Rs. 20.30. The share price of Dankotuwa Porcelain lost Rs. 0.70 (2.90%) to close at Rs. 23.40.

With Tuesday’s dip, Softlogic said it was evident how easily the speculative counters could lose ground while blue-chip counters held their ground amidst the profit taking, which gave a breather to the upsurge. “Therefore we continue to advice our investors to pick value counters which are in still abundance and are likely to safeguard the capital of the investor,” it added.

DNH Financial said: “We view the current market levels as an attractive entry point for both foreign and domestic investors seeking healthy returns in the medium to longer term. With the price of relatively lower quality companies having risen to considerably high levels during the 2009/2010 bull run, an opportunity to invest in companies of superior fundamental value now exists with significant upside potential of reversing relative underperformance.”

“As we head deeper into the third quarter of 2012, we expect the market to continue to gain momentum even though intermittent bouts of profit taking could slow the ascent. However, even within the quality company segment, we advise investors to be selective by investing in companies that have low debt/equity structures and relatively lower energy consumption needs,” DNH added.