Stock market recovers on renewed optimism

Thursday, 1 December 2011 00:00 - - {{hitsCtrl.values.hits}}

Stock market rose 1.12 percent to a one-week high on Wednesday on retail buying amid expectations President Mahinda Rajapaksa will accede to broker requests to help increase trading and liquidity in the bourse.

The island nation’s main share index fell 0.74 percent in early trade surged 1.12 or 67.32 points firmer to 6,087.40, its highest since Nov. 22.

The bourse surged 4.14 percent on Monday from a 14-month low after Rajapaksa met the heads of stock brokerages after last week’s currency devaluation and continued pushback over increased regulation by the Securities and Exchange Commission (SEC).

“The bourse went up expecting a positive announcement from the SEC,” a market analyst said on condition of anonymity.

Brokers have complained investor sentiment has turned negative due to firmer regulation by the SEC, which has looked into price manipulation and decreased the amount of credit available in the market.

Shares in retail favourite Hva Foods Ltd closed 6.12 percent firmer at 41.60 rupees a share and shares in Environmental Resources Investment PLC surged 21 percent to 54.70 rupees.

Market heavyweight John Keells Holdings PLC, which saw foreign buying of 859,500 shares, ended 2.47 percent weaker at 170 rupees.

The day’s turnover was 2.07 billion Sri Lanka rupees ($18.17 million), highest since Oct. 31 but less than last year’s average of 2.4 billion and this year’s 2.4 billion.

Total volume was 74.2 million shares, against a five-day average of 89.3 million. The 30-day and 90-day average trading volumes were 58.8 million and 101.5 million. Last year’s daily average was 67.9 million.

The bourse has fallen 10.3 percent since Oct. 1 and it rose to Asia’s ninth-best performer with a year-to-date loss of 8.27 percent. It gave Asia’s best returns in 2009 and 2010.

The bourse saw a net foreign inflow of 107.3 million rupees on Wednesday, but thus far in 2011, offshore investors have sold 17.4 billion, and a record 26.4 billion in 2010.

On Wednesday, the bourse was in the neutral territory with the 14-day relative strength index at 43.6, above the lower neutral range of 30. Gainers outnumbered losers by 167 to 37 on Wednesday,

Thomson Reuters data showed.

The rupee closed flat at 113.89/90 rupees a dollar for the sixth straight session, dealers said.

On Wednesday the central bank raised its benchmark 91-day T-bill rate by 25 basis points to an 18-month high and it had risen 69-140 basis points in the last two auctions.

Sri Lanka’s annual inflation slowed to a 16-month low of 4.7 percent in November from a year earlier, government data showed on Wednesday. (Reuters)