Foreign inflows persist at Colombo Bourse

Persistent flow of foreign buying lifted investor sentiments yesterday, resulting in the more active Milanka Index gaining though the All Share Index closed marginally down.

Bringing the year-to-date figure to Rs. 28.2 billion, net foreign inflow yesterday was Rs. 108 million out of turnover of Rs. 367 million. The ASPI closed 0.39% down whilst the MPI outpaced with a gain of 0.85% and the S&P SL20 index inched up by 0.28%.

“The recent foreign play notable in their selective favourites seem to have been an eye-opener for the local investors as an improvement in the overall sentiments of the Bourse was observed,” Softlogic Stockbrokers said.

It said Foreign Institutional Investors (FII) have increased their footprints in the Bourse at the expense of the local investors who have mostly noted on the sidelines or the sales end.

“The attractive valuations and the abundance of well-beaten stocks have led to the pump of capital into Sri Lankan equities by the non-nationals. It is clear cut that the local investors are merely losing on the discounts available as we see the overseas investors feasting on the bargains. It is a known fact that foreigners would not invest in a depreciating currency environment as this, as they will be forced to withdraw less when they need to take money home. The Colombo Bourse’s advancement to be amongst the region’s attractive investment radar has blinded the foreigners by the fact of the country’s depreciating currency,” Softlogic Stockbrokers said.

Lion Brewery secured its place in the top turnover slot as a further 100,000 share crossing took place at Rs. 230 followed by three on-board trades counting 141,300 shares at Rs. 230 and Rs. 229. The brewer saw its price ballooning up 9.5% since the sudden surge of foreign interest.

“Foreign buying into the counter is backed by the confidence laid on the extensive expansion plan by the beer industry, with Lion Brewery taking the lead. The share, which joined our growth bandwagon in April 2012, now trades at 12.0X FY12E and 9.0X FY13E,” Softlogic said.

John Keells Holdings continued with its trend as a 50,000 share block was taken on board at Rs. 198 whilst Distilleries persisted to see investor attention as it gained 0.7% for the day. PC House saw 8.5 million shares trade at Rs. 5.90 during the closing hours of trade in the market.

People’s Merchant Bank was drawn to the top trading screen after an 874,900 share deal took place at Rs. 14 in the market. Commercial Bank, Nations Trust Bank and Sampath Bank topped the banking sector picks as the trio advanced 1.3%, 5.1% and 0.9% at their close of Rs. 101.2, Rs. 52.1 and Rs. 166.0 respectively.

Lanka Orix Leasing encountered an 119,000 share block taking place in the market at Rs. 40 whilst Richard Pieris saw a number of mid-sized parcels moving hands in the market. Citizens Development saw a 200,000 share quantity being picked in the market at Rs. 28 whilst LAUGFS Gas (non-voting) saw a similar transaction reading 340,500 share at Rs. 13.5. Interest was also evident in John Keells Hotels and Ceylon Cold Stores along with Aitken Spence and its hotel holdings.     

With the ascending interest rate pattern, Softlogic Stockbrokers is encouraging investors on the ‘Buy and Forget’ scheme. “These stocks rise and fall from day to day too, but years from now, the companies behind them should still be dominant players in their industries, providing for its investors. Such stocks include picks with high DYs (with the present down run and interest rate in mind), long-held stable management comprise, strong diversification with solid brands and less share price flux,” the stockbroker said.

“The investment yardstick should be extended eyeing a minimum three years, whereby you buy on the confident play and forget worrying on the daily fluctuations. But to be noted would be that pricing of these stocks comes with a premium with the safe featuring,” Softlogic said, adding that cumulative earnings for 1QFY13 stand at Rs. 31.1 billion (-17% YoY and -33% QoQ) holding the market’s trailing PER at 10.9X.