Positive corporate earnings add stimulus to investor sentiments
Monday, 25 August 2014 00:00
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87% of listed firms’ reported earnings up 14% to Rs. 39.16 b in June
Cumulative six months earnings up 5% to Rs. 93.6 b
Positive growth in corporate earnings reported so far has given an added stimulus to investor sentiments in boosting the Colombo stock market to reach a psychologically-important milestone last week.
Acuity Stock Brokers Research said approximately 87% of the market reporting a 14% Y-o-Y increase in earnings for the quarter ending June 2014 (to Rs. 39.16 billion in comparison to Rs. 34.24 billion in June 2013).
On a cumulative six month basis, earnings increased 5% Y-o-Y to Rs. 93.66 billion from Rs. 88.95 billion in the same period last year.
The key contributing sectors to this Y-o-Y gain included the Telecommunication, Chemicals and Pharm-aceuticals, Plantations and the Hotels and Travel sectors.
“Positive corporate earnings also supported market sentiment,” said Acuity.
Equity markets last week hit a high note as the benchmark price index surged past the key 7,000 resistance level for the first time in three years.
Activity levels were supported by significant high net worth investor and institutional participation with crossings accounting for 54% of total market turnover. Retail participation too improved notably as gains on the Bourse extended 17% Y-T-D.
“Markets in the week ahead are likely to retain momentum on the back of the recent upsurge in the ASPI. However, given that indices have moved up sharply in a relatively short span of time, investors can expect some profit taking on selected counters,” said Acuity.
It also said that strong balance of payments has helped the Sri Lanka Rupee remain steady.
The country’s external sector continued to strengthen, with the cumulative (January-June 2014) trade deficit declining 20.1% Y-o-Y to $ 3546.1 million. Earnings from exports during the first six months recorded a 16.8% Y-o-Y growth, driven by an expansion in all major export categories.
Import expenditure, meanwhile, declined 1.2% Y-o-Y in H1 2014, led by a 15.8% Y-o-Y decline in Investment good imports. Inflows to the current and financial accounts too remained strong as tourism earnings (+33.8% Y-o-Y) and workers’ remittances (+10.6% Y-o-Y) recorded Y-o-Y gains, while FDI and debt and equity market inflows remained robust, Acuity said.
The county’s gross official reserves consequently improved to an equivalent of 6.1 months of imports by end June 2014 (as opposed to 5.9 months in May 2014).
“The country’s overall H1 2014 balance of payments is estimated to have recorded a surplus of $ 1,953.6 million (in comparison to a deficit of $ 169.2 million in H1 2013) helping the Sri Lanka Rupee to remain largely steady and record a marginal appreciation (+ 0.45% Y-T-D),” Acuity Stock Brokers Research said.
