Santa visits Colombo bourse! Market cap soars by Rs. 28 b

• Six-day losing streak ends as ASI gains by 1.3% though most investors out with turnover dropping to two-and-a-half-year low

The Colombo stock market saw a welcome rebound yesterday, raising hopes for a Merry Christmas over the weekend as hitherto weak-hearted investors appear to have received a boost from impressive economic data.

Improved sentiments saw the value of the market rise by Rs. 28 billion as the benchmark ASI gained by 1.3% to a month high. Turnover however dipped to a two-and-a-half-year low of Rs. 349 million as the bulk of investors remained inactive, according to SC Securities. It added that the absence of crossings too contributed to the poor turnover.

Despite the turnover setback, analysts found yesterday’s rebound encouraging, the reason being the return of sentiments on blue chip and fundamentally sound stocks. Credence of yesterday’s revival however will be confirmed only if the bourse remains positive today before closing for Christmas.

Though on thin volumes, premier blue chip JKH rose by 1.2% whilst index-heavy SLT and HNB also gained by 4% along with several other blue chips. Commercial Bank, Janashakthi Insurance and PABC Bank were major contributors to turnover, accounting for 23% of the total.

Commercial Bank gained by near 1% and Janashakthi rose by 5.56% with 1.5 million shares traded for Rs. 23.5 million whilst Pan Asia Bank saw over half a million shares traded for Rs. 17.2 million, though the share price closed unchanged. Asia Securities described play on Janashakthi and PABC on account of those being previously neglected.

Overall interest on these stocks boosted the Banks, Finance and Insurance sector index to improve by 1.7%.

Diversified sector also contributed significantly to the market turnover (due to Expo Lanka) and the sector index rose by 0.81%. The share price of Expo Lanka increased by Rs. 0.20 (2.35%) to close at Rs. 8.70. Asia Wealth said Expolanka saw retail interest on the back of the announcement that it had bought a 50% stake in a processed meat producer, Norfolk Food Ltd.

The Beverage, Food and Tobacco sector was also among the highest contributors to the market turnover (due to HVA Foods) and the sector index shed 0.59%. The share price of HVA Foods gained Rs. 1.70 (4.97%) to close at Rs. 35.90.

“Market witnessed energised retail activity towards the closing hours, which drove both indices up, with the ASPI and MPI gaining 1.31% and 1.56% respectively,” NDB Stockbrokers said. However, it added that turnover remained “uninspiring”.

Arrenga Capital said: “The Colombo bourse reverted to green, putting a halt to six consecutive days of losses, despite participation levels shrinking to a yet another record low.”

“The market, which initiated trading moving in the same lethargy mode observed over the past few days, saw the indices absurdly hiking up over the last two trading hours. This was followed by the ASPI and MPI touching high points of 5,940.21 (up 97.4 points) and 5,186.82 (up 98.6 points) respectively during latter trading hours, driven primarily by retail participation,” it added.

The day’s gainers outperformed losers by 146, where the counters were seen making considerable gains on very thin volumes.

“The sustainability of this rally is highly susceptible as such haste runs are proven to be short-lived, however we keep reminding our investors to stick to the steady lot, which would create high value over the long-term,” Arrenga opined.

With minimal downside risk expected, DNH Financial on its part is advising investors to take advantage of the robust domestic economics and corporate fundamentals to buy into counters with sustainable financial attributes.

The Census and Statistics Department on Wednesday revealed that third quarter GDP grew by 8.4% highest quarterly growth for the year and above 8.2% a year earlier.

“While equity investors have been hit relatively hard over the past couple of months following a series of events which have taken investor attention away from the strong corporate performance of several blue chip heavyweight and middleweight counters, we believe the window to invest is now open for those willing to have a selective alpha-driven approach. We believe firmly, however, that the market is now entering a pivot point, leading to a re-rating. However, stock selectivity will determine the winners from the losers,” DNH added.

Yesterday’s gain helped reduce ASI’s year-to-date dip marginally to 10.8% as opposed to near 12% as of Wednesday. Colombo remains Asia’s 12th best performer though since 1 October the bourse has fallen 12.7%.

The market also saw a net foreign outflow of Rs. 36.2 million whilst foreigners have sold Rs. 18.2 billion thus far in 2011 and a record Rs. 26.4 billion in 2010.