Misreading of T+5 checks market’s gain

Over 1 m COMBank shares trade; Bairaha peaks to new high

An apparent misreading of T+5 directive issued by the Securities and Exchange Commission (SEC) checkmated the Bourse’ eight consecutive days of gain yesterday.

“Market slightly recovered after the initial panic selling triggered by the new SEC directive on force selling at T+5 of securities of buyers who are in default of settlement by T+3. Indices gained around 70 points after falling over 100 points in the morning,” NDB Stockbrokers said. The Bourse eventually closed 0.49% down whilst early morning fall amounted to 1.76% from Bourse’s highest close since 4 November.

The SEC ruled the stock broking companies to force-sell by T+5 securities of buyers which are in default after T+3 days, in order to recover the monies owing to them by such defaulting clients with effect from 1 January 2011.

This directive will apply to new trades after 1 January 2011, not legacy trades or for those already executed. For existing portfolios with brokers, the SEC previously announced the deadline of 31 March 2011 to clear 50% of debtors’ position and 30 June 2011 to clear 100% of debtors’ position.

Bank, finance & insurance and beverage, food and tobacco sectors were the highest contributors to the market turnover. Bank, finance and insurance sector index decreased by 0.46% while beverage, food and tobacco sector index increased by 0.56%.

Commercial Bank made the highest contribution to the market turnover with five crossings (929,000 shares at Rs. 260 and 100,000 shares at Rs. 260.50) although the share price decreased by Rs. 2 (0.76%) and closed at Rs. 260.50.

Seven other crossings were recorded for 5,800,000 shares of Dialog Axiata at Rs. 12; 280,000 shares of Lanka Walltile at Rs. 127; 7,000,000 shares of Renuka Agri Foods at Rs. 6.50; 300,000 shares of Dipped Products at Rs. 120 and 150,000 shares of Aitken Spence & Co. at Rs. 168.

Investors continue to feast Bairaha Farms as its share price peaked to an all time high of Rs. 304.90 before closing at Rs. 303.40, up by Rs. 13.20 or 4.5% from Wednesday. Around half a million shares of Bairaha traded.

Colombo which remains Asia’s best performer in 2010 has surged 95.4% year to date. Turnover yesterday was Rs. 2.1 billion more than three times the 2009 daily average of Rs. 593.6 million but below this year’s average of Rs. 2.4 billion.

Foreign investors have sold a net Rs. 26.1 billion worth shares this year and on Thursday, they sold a net Rs. 71.8 million.

The bourse is trading at a forward price-to-earnings (P/E) ratio of 17.6, the highest among emerging markets, compared with 13.1 of Asian markets and 12.1 of global emerging markets, Thomson Reuters StarMine data showed.  

The CSE’s 14-day relative strength index is at 60.4, towards overbought or the upper neutral limit of 70. On Thursday, 154.9 million shares changed hands, as against five- and 30-day average of 42.9 million and 52.2 million, respectively. The 90-day average volume is 63 million. In 2009, daily average volume was 19.8 million.

Meanwhile Sri Lanka’s rupee ended flat at 110.92/96 a dollar in sluggish trade, currency dealers said. It has risen 3.07 percent so far this year.