The Bourse Weekly Performance (Week ended December 13th,2013)

Trading at the Colombo bourse remained passive recoding low daily turnovers and volumes. The benchmark index was progressively moving upwards except during Tuesday’s trading, but ended the week with a WoW dip. The ASI lost 14.6 points WoW to close at 5,795.7 points (-0.3%), whilst the S&P SL20 Index gained 2.6 points WoW to close at 3,185.7 points (0.1%). Indices lost mainly on the back of losses made by Nestle Lanka (-4.6% WoW), Asian Hotels and Properties (-7.2% WoW), Carsons Cumberbatch (-2.5% WoW), Sri Lanka Telecom (-1.6% WoW) and Ceylon Tea Services(-7.5% WoW)

Market was predominantly on the positive trajectory during the week except during Tuesday’s trading, despite ending with a WoW dip, whilst the level of activities showed dreary signs with a WoW dip of c.66.0% and c.87.0% in the cumulative turnover and volume respectively. Crossings and large-scale transactions on few index heavy weights with the support of institutional and high net worth investors added volume to daily activities whilst retailers continued to remain on the sideline. However, number of crossings witnessed during the week was relatively lower cf. weeks. John Keells Holdings emerged asthe highest turnover contributor for the week with a cumulative c. LKR 311.0mn, which is 19.0% of the week’s turnover tally, with the aid of few crossings and large-scale transactions.

In addition, amongst two other counters that witnessed share crossings during the week United Motors, foreign participation, where c.1.88mn shares nearing 3.0% of the issued shares changing hands at LKR 110.0. This transaction pushed back the bourse’s net foreign inflows to LKR 23.0bn which fell off due to selling pressure over the past few weeks. Further, a crossing on Hatton National Bank (non-voting) shares was witnessed at LKR 116.60.

Week recorded a total volume of a mere 67.3m shares, of which Asiri Hospital Holdings recorded the highest volume of 5.6mn shares followed by non-voting shares of Tess Agro, The Finance Company and Blue Diamonds Jewellery. In addition, Amana Bank IPO which opened which opened for subscription on the 11th December 2013 received applications amounting to the value of LKR 1.08bn as of 12th December 2013, where the Bank plans to raise c.LKR 1.5bn through the IPO. In addition, National Development Bank which came up with the country’s largest debenture issue of LKR 10.0bn was oversubscribed, whilst Nation Trust Bank witnessed its LKR 3.0bn worth debenture issue also being oversubscribed during the week.

The week saw foreign purchases amounting to LKR 660.0mn, whilst foreign sales amounted to LKR 430.0mn. Market capitalisation stood at LKR 2,411.2bn and the YTD performance is 2.7%.


Conclusion: Dip in Earnings with a Growing GDP Puzzles the Colombo Bourse

The volume of trading activity in the Colombo Bourse remained mostly low during the recent weeks which could be partly attributed to the significant drop in market earnings in 3Q2013 by circa 30% YoY to LKR 32.5 billion. However, conversely, it should be noted in this regard that real economic growth during the period witnessed one of the highest rates in the world by reaching as much as 7.8% YoY. The puzzling phenomenon of drop in market earnings as much as 31% YoY and real economic growth rate touching one of the highest in the world during the same period demands explanation. High rate of growth in the economy in spite of the drop in market earnings during the same period indicates that the growth in the economy was taking place outside the traditional sources of private sector growth. This further indicates that economic growth was more or less reliant on increasing government expenditure as opposed to the expansion in the private earnings. On the other hand, number of unemployed persons from end of 2012 to mid 2013 increased 24% to 401,000 from 324, 000 while growth was high during the period.

The other curios phenomenon would be the drop in Hotels and Travel sector earnings of the listed companies sharply by 29% YoY in 3Q2013 while conversely, official statistics at the national level show tourist arrivals and tourist earnings were up 16.8% YoY and 26% YoY respectively during the first ten months of the year. The growth in tourist incomes at the national level and the drop in earnings of the listed companies in the leisure sector indicate that the growth in arrivals was absorbed by service providers outside the listed group of companies. Hence, it further indicates that the middle level hotels and restaurants ranging from three star grade to below were benefiting from the growth in arrivals while the higher grade hotels have not been able make the expected gains from the boom in tourism in the economy. Market forces driving the Colombo bourse under this setting would find it difficult to interpret the relationships between different categories of economic data that is currently released to the public sphere. In this backdrop we believe that this particular bewilderment that arise from the puzzling nature of economic changes that set in during recent times would have also caused the market activity to remain below the average levels.
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http://www.sundayobserver.lk/2013/12/15/fin53.asp