Market to remain topsy-turvy predicts Asia Securities

Urges investors to hunt for ‘value’; Says T+3 has been an unnecessary fear psychosis

The Colombo stock market which had a mixed run is forecast to remain topsy-turvy this week as well by Asia Securities.

It said that with the T+3, the retail segment of the market would be looking for the quick “ups” and selling off to settle credit.  “However, we see the institutions and the high-net worth individuals collecting at reasonably good prices,” Asia said adding from a fundamental perspective, the Colombo bourse is at 20.0x its trailing earnings, back of September earnings showing healthy growth of 39.7% QoQ.



“We are yet to see buying pressure created on certain counters which showed impressive quarterly earnings. Hence, Asia Research feels the retail segment has not identified the real value counters,” the stock broker said.

In view of this, Asia said fundamentally strong counters with low PE multiples have not been exploited. The broker also said T+3 has been an unnecessary fear psychosis the majority of the market has fallen into.

“Ironically, the regional more developed markets also operate at T+3/ T+2. Hence, it should not be a huge deterrent on our market. In actual sense, it would prevent the market moving into more “Ponzi” levels, which actually brings more stability to the market as well as stock brokering companies,” Asia said.

It was of the view that Colombo bourse should not be eyed as “Casino” play, as the companies listed take years of strategic thinking to create economic value addition to the share holders, certain projects take years to give economic payback. “Hence, is it sane to play the market like “Casino”?” Asia queried.

It said that “Casino” play will prevent the investors in exploiting the true potential due to high transaction costs as opposed to a medium – long term outlook.

Colombo bourse requires more IPO’s (fundamentally strong), liquidity and different options (ETF’s, Derivatives, Short Selling etc.) to give the investors more choice in terms of investing. Invariably making investors look at different stocks/options to create healthy investing. As opposed to looking at the same counters and pushing them “up” and “selling” Asia Securities said.

Acuity Stockbrokers in its report said that trading activity at the Colombo bourse last week was on a mixed note with the indices losing on profit taking to gain the following day on buying interest. However, the volume of shares transacted and the value generated including net foreign buying of Rs. 3 billion indicates improved sentiments from the previous week.

“We expect the market to continue this trend during the week ahead with interest in selected counters and fundamentally strong stocks to persist. Secondary market trading of Laugfs is expected to kick off during the week ahead giving impetus to investor outlook,” Acuity Stockbrokers said.

Last week came as breather as the indices gained considerably compared to the previous week after recording losses consistently. ASPI gained by 2.61% up by 166.61 points to end at 6547.68. Relaxation in credit guidelines by SEC coupled with refund of Laugfs boosted the market. Foreign investors were on a buying spree and selected counters witnessed significant interest from investors. Milanka added 102.80 points to end at 7055.45 increasing by 1.48%. Aggregate turnover for the week was Rs.14.6 bn as against Rs. 8.3 bn the week before. Market Capitalisation was recorded at Rs.2169.39 bn as against Rs.2114.16 bn recorded in the previous week.