Net foreign buying in Colombo Bourse soars to Rs. 4 b by mid-March

Despite bearish sentiments from local investors, foreigners continue to be upbeat, with the net inflow to the Colombo stock market increasing to nearly Rs. 4 billion so far this year.

The positive figure can be entirely linked to March, as the Colombo Stock Exchange (CSE) ended February with a negative outflow of Rs. 400 million. Due to local investors staying away and negative sentiments, the Colombo Bourse’s year-to-date return is only 1% whilst the S&P SL 20 had grown by nearly 6%.

As per CSE data, in the first week of March, net buying amounted to Rs. 3.28 billion whilst last week it was Rs. 1.07 billion, bringing the total net buying to over Rs. 4 billion.

Softlogic Stockbrokers put the year-to-date net inflow at Rs. 3.6 billion and linked it to recent buying into Banking, finance and insurance as well as Diversified sectors.

It also said the trend etched around heightened activity in the BFI sector is expected to continue backed by impressive earnings growth. (Earnings for 3QFY13/4Q2012 grew 86% YoY and 113% QoQ while cumulative sector earnings grew 24% YoY.)

“We reiterate pragmatic investors to capitalise on the stagnation of indices which has left further opportunity for accumulation of these growth picks trading attractive valuations,” Softlogic said.

“We strongly believe that if foreign interest continues to persist, it is likely to improve the market activity level by building the confidence amongst the local retail investors. We continue to advice the investors to take positions in fundamentally strong counters, which have strong growth prospects with a mid to long term investment tenure,” Asia Wealth Management added.

It said foreign interest in the market continued to show a strong recovery for the second consecutive week. During the week foreign interest was mainly revolved around fundamentally strong counters such as John Keells Holdings, Commercial Bank, National Development Bank and Sampath Bank, etc.

Acuity Stockbrokers said in the first week of March foreign buying was dominated by Asian Alliance Insurance (Rs. 1. 19 billion), Commercial Bank (Rs. 528 million), Cargills (Rs. 524 million), Commercial Bank (Rs. 497 million) and Sampath Bank (Rs. 297 million), whilst last week JKH (Rs. 736 million) and Sampath Bank (Rs. 109 million) led foreign purchases.

The Daily FT learns two funds, which have been focusing on Sampath Bank and LOLC, stepped up buying in recent weeks as well as, while a new foreign investor picked up Rs. 90 million worth of shares in Odel.

Whilst retails remained largely on the sidelines, high net worth but low profile individual investors collected sizeable quantities in the banking sector.

Asia Wealth also said last week it was evident that local retail players were on a cautious mode looking at the future direction of the market.

The weekly treasury bills auctions which continued to witness an increase in yields for the second consecutive week coupled with the cut down in Sri Lanka’s economic growth forecast for 2013E by SCB could have also resulted in the above lethargic momentum in the volumes.

“It is noteworthy that the Sri Lankan equity and FOREX markets responded positively to the proposed electricity tariff hikes by the government authorities. This is mainly on the believe that the electricity tariff hike is likely to reduce the government borrowings, strengthen the balance of payments and infuse further stability to the external position of the economy in financial terms,” Asia Wealth added.