Stock market dips on profit taking, foreign outflow continues

(Reuters) - Sri Lanka’s stock market lost on Thursday as retail investors booked profits after a recent rally as foreign investors continued to be net sellers in an overbought and expensive market.  

Foreign investors sold a net 92.1 million rupees’ worth of shares on Thursday and have sold a net 2.7 billion rupees so far in 2011, after selling a record net 26.4 billion in 2010.  

The island’s main share index <.CSE> closed 0.42 percent or 30.76 points weaker at 7,211.11, its second fall this year.

It hit a record closing high of 7,261.37 on Monday after touching a new intraday peak of 7,320.22 points.

It has been Asia’s best performer with an 8.67 percent gain in 2011 after being the top performer last year with a 96 percent return, but the recent retail buying has pushed it deeper into the overbought region with a 14-day relative strength index at around 80.

The bourse is trading at a forward price-to-earnings (P/E) ratio of 18.1, highest among emerging markets, compared with 12.9 in Asian markets and 11.9 in global emerging markets, Thomson Reuters StarMine data showed.

      Analysts also said December quarterly earnings released so far have yet to boost the market. On Thursday, market heavyweight John Keells Holdings <JKH.CM> posted a 54 percent rise in its December quarter profit and analysts said it was in line with expectations.

Turnover on Thursday was 4.1 billion rupees ($37 million), more than last year’s daily average of 2.4 billion.  

The traded share volume was 137.8 million against a five-day average of 165.9 million. Last year’s daily average volume was 69.2 million.  

The rupee <LKR=> closed weaker at 111.10/15 a dollar from Wednesday’s 111.05/111.15 on strong importer dollar demand,  traders said.

Investors retreat from plantations

Investors rushed to plantation stocks this week, walked out yesterday with relatively little activity forcing the sector index to dip. The sector index declined by 46 points to close at 1,712 whilst only 6 million shares traded generating a turnover of Rs. 377 million.

Some analysts attributed the dip to overheating of the sector whilst others pinned it to the fact that two popular stocks falling in to the SEC’s price band.

On Wednesday heavy interest saw the plantation sector accounting for the highest turnover of Rs. 1.19 billion with slightly over 21 million shares transacted via 11,657 trades. The sector’s price index peaked to record high up by 208 points or 13.4% from Tuesday.

Compared to all 18 stocks gaining on Wednesday, there were only three stocks moved up yesterday.