Stock market ‘moves up’ to 5-week high

The Colombo Bourse yesterday produced an encouraging rebound largely powered by improved sentiments following a capital market stakeholder meeting with Finance Ministry Secretary Dr. P.B. Jayasundera on Tuesday.

After a sharp rise in early morning trade, the market cooled off with a degree of profit taking with the ASI closing up 0.3% or 15 points to 4,960, the highest since June 29. Market’s value rose by Rs. 7 billion, one of the highest day gains of late.

“Trading on the bourse opened on a positive note supported by last Tuesday’s meeting between government officials and brokers aimed at addressing market concerns and uplifting investor sentiment,” DNH Financial said adding the market saw relatively improved investor participation.

Market turnover rose to Rs. 754 million with trading in premier blue chip John Keells Holdings, banking heavyweight Hatton National Bank and new diversified entity PCH Holdings accounting for 25% of the day’s total.

“Sentiments bloomed as investors were confident after the Secretary to the Treasury’s promised to reconsider credit rules, one of the backslappers of the bourse,” said Softlogic Stockbrokers. “With the caption of the high index counters on top of the turnover list, with some silent accumulation taking place, the confidence level in the earnings of these companies is highlighted. John Keells Holdings, Distilleries Company of Sri Lanka, Sampath Bank, Commercial Bank, Ceylon Tobacco and  DFCC Bank; have all taken the top slots of turnover rankings for the day,” it added.

Reuters also said the market gained on hopes the Government will act to revive trading on an exchange that has fallen 18 percent so far this year.

“The market has responded positively to the (Treasury) meeting outcome, but it will take a lot more time to see policy action being implemented,” Reuters said quoting an unnamed stockbroker.

The action includes an enhanced credit facility to revive retail investor interest in the short term and steps to build broker capital infrastructure in the medium term.

NDB Stockbrokers headlined its report as “Bullish sentiments” and said multinational Ceylon Tobacco Company touched the Rs 700.00 mark, while heavy weight John Keells Holdings attracted institutional and high net worth interest. The counter witnessed two parcels changing hands to end the day with a marginal gain. Hatton National Bank saw a parcel changing hands at a premium price while a significant block of PCH Holdings also got traded during the latter part of trading. The share price of John Keells Holdings gained Rs 1.10 (0.60%) to close at Rs 185 whilst the share price of Hatton National Bank increased by Rs 0.80 (0.60%) to close at Rs 134.

Accumulation was evident in Distilleries Company as the counter saw a 150,300 share block being taken on board at Rs. 120.

The poultry feed miller’s charm of 366% YoY growth in earnings for 2Q2012 have led the retailers to blindly involve in the counter as it was seen reaching a high of Rs. 51.90 before its close at Rs. 50.60 (up 2.25%). Softlogic Equity Research has signaled investors to be cautious on the counter as Ceylon Grain Elevators’ earnings has been led by one-off gain in disposal of its associate as it continues to battle with working capital issues created by dollar appreciation, gross profit margin pressure and high finance cost.

Acme Printing & Packaging topped the speculative play list as it was seen rallying as much as Rs. 16.2 before settling at Rs. 15.5 at close. Retail participation was prominent in Colombo Fort Land & Building, Lanka Hospital Corporation, Fee Lanka Capital, Kalpitiya Beach Resorts, E Channelling and Blue Diamonds [Non-Voting].

Foreign investors were net buyers of Rs. 102.5 million extending the net foreign inflow this year to Rs. 25.7 billion ($194.92 million).

The rupee meanwhile closed steady at 131.70/132.10 against the dollar, as importer dollar demand offset banks dollar sales.

Dealers expect the rupee to weaken further on expected importer dollar demand.



DNH Financial in its daily report said despite the country’s robust macro-economics (notwithstanding the current inflationary pressures), it is very disappointing to note that the Sri Lankan bourse has significantly underperformed the majority of global markets this year having declined by 31%YTD in dollar terms.

“While most market commentators have cited no credible reason for the market’s decline, we believe that it is purely a matter of negative domestic investor sentiment that has stifled investment flows into the bourse over the last couple of months, although in contrast, foreign investors have been cherry picking investments especially in blue chip counters. Consequently, we believe the biggest risk to the bourse now is not one of fundamentals but that of negative domestic investor sentiment that is denting performance and barring the market from re-rating to higher levels. We advise domestic investors to break away from the herd and select bluechip stocks with a medium to longer term investment horizon,” DNH Financial added.