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Analysts upbeat new valuation will spur fresh buying
Proving Daily FT’s concerns right, the Colombo stock market yesterday crashed to its lowest level in 2011, but a chorus is growing that new valuation will spur a fresh round of buying with some already collecting available quantities.
The benchmark All Share Index (ASI) dipped by 1% or 69 points to close at 6,389 points, lowest for the year, crossing the previous shallow of 6,434 points suffered on 25 July. Yesterday’s dip brought the year-to-date negative return to 3.73% whilst the Milanka Index was more woeful, down by near 19%.
Around Rs. 25 billion in value was wiped off, though lower in comparison to Rs. 33 billion on Monday as exclusively reported by the Daily FT. The loss of value in October so far reached Rs. 141 billion by yesterday.
The return of bargain hunters was evident as ASI’s eventual finish was better in comparison to over 100 points dip in early trading hours. “Forced selling was witnessed due to the increasing margin calls and panic selling was also witnessed across the board,” NDB Stockbrokers said.
It said the market started on a declining note as yesterday’s negative sentiments continued to prevail.
ASPI witnessed high volatility during early trading hours as more than 100 points were shed.
“Although the market managed to gain some ground during the day through institutional buying, it ended in red by hitting this year’s lowest closing level,” NDB added.
SC Securities said the market conditions continued to “look murky,” whilst noting that panic selling was partly responsible for the downfall as some investors were keen on realising profits whilst others were keen on cutting losses.
DNH Financial said that “it was a choppy day for the bourse” and the “performance was definitely disappointing” whilst Lanka Securities said drifted down further triggered by high level of selling pressure.
“The market continued to slump down, retreating sharply from its mild recovery at open, as selling pressurised by advisors calling into ensure that the margin accounts are brought up to the minimum maintenance level. The day’s price losers outperformed the gainers by 181 to just 29,” Arrenga Capital said in its observations.
An institutional investor told the Daily FT that the market would pick up by Thursday as a fresh round of buying is likely as per new valuations. “With prices having fallen to a more realistic level, fundamental valuations will come to play now. Therefore, timing is right now to buy, though prudently,” Ceybank Unit Trust CEO Chitra Sathukumara said.
DNH Financial said indications are that the market could shed a few more points over the next few days before consolidation sets in. This was notwithstanding exceptionally robust fundamentals both on the economic and corporate front.
“However, with the 3Q2011 results in the offing, we expect selling pressure to gradually ease off in anticipation of a re-rating that would coincide with perhaps one of the strongest 3Q results releases in recent years,” DNH Financial emphasised
Lanka Securities also noted that with ASI witnessing a steep fall to its major support level at 6,250 points there was a potential to bounce back to the positive zone or another steep sell down.
Of the 29 gainers yesterday out of 229 traded companies, Carsons Cumberbatch, Sri Lanka Telecom, Royal Ceramics, Cargills (Ceylon) and Ceylon Tobacco emerged to the sound counters to witness price appreciations, according to Arrenga Capital. The speculative counters filled in the price losers’ list, it added.
Institutions and high net worth individuals were seen taking a bottom fish strategy as sturdy counters such as Buki Darah, Dialog Axiata, John Keells Holdings, Commercial Bank and Carsons Cumberbatch were seen traded. The telcos in specific had moved out of their hibernation period, emerging to be the only sector which gained yesterday.
Premier blue chip JKH continued to remain in the top turnover club for the sixth consecutive day closing at Rs. 198.5 with a decline in price of 0.6%. Overall Diversified Holdings sector was the main contributor to the market turnover. Bukit Darah contributed the biggest turnover of Rs. 90.7 million, which Asia Wealth Management pinned to heavy institutional interest over renewed sentiments towards oil palm.
The Beverage, Food and Tobacco sector also contributed to the market turnover (due to HVA Foods) and the sector index decreased by 0.23%. The share price of HVA Foods decreased by Rs. 6.10 (14.77%) to close at Rs. 35, whilst it saw retail play along with Colombo Land, and the duo accounted for 30% of the turnover.
The manufacturing sector also contributed heavily to market turnover (due to Regnis Lanka) and the sector index came down by 0.68%. The share price of Regnis Lanka decreased by Rs. 15.10 (3.2%) to close at Rs. 469.10.
Continued interest in Dialog Axiata was witnessed as several crossings took place; 10,000,000 shares of Dialog changed hands at a price of Rs.8.10.
Foreign purchases amounted to Rs. 128.8 million whilst foreign sales were Rs. 164.4 million, resulting in a net outflow of Rs. 35 million.
Global markets meanwhile tanked after China posted lower-than-expected economic growth, while Moody’s warned France that it may lower its credit rating amid growing Eurozone debt concerns.
Arrenga said the cautious investor approach had driven Asian markets down from its one-month high whilst European stocks also fell with China reporting a slowest paced economy growth since 2009 and as Germany toned down expectations in ending the crisis.
The MSCI Asia Pacific Index sank 2.5%, marking its biggest slump in two weeks. This was as a result of China’s GDP growth rate falling below expectations to 9.1% during 3Q2011 from 9.5% last quarter.
Market volatility has been triggered with concerns arising on the rosy drawn up for a quick tame of the crisis. More than 11 stocks in the Asian market declined for each that gained today. Investors have been on a very cautious note with Chinese growth rates driving worry on the global economic position.
European stocks retreated from recovery rally as Euro zone debt scene fell back in focus. Euro Stoxx 600 fell 0.8% to 234.33 points at around 3 p.m., local time. Investor participation was further slowed after France was threatened of a rating cut.
Expectations of a complete solution to the crisis at the next weekend summit has remained unanswered, especially with German investor confidence falling to the lowest in almost three years.
http://www.ft.lk/2011/10/19/stock-market-crashes-to-lowest-level-in-2011/
Proving Daily FT’s concerns right, the Colombo stock market yesterday crashed to its lowest level in 2011, but a chorus is growing that new valuation will spur a fresh round of buying with some already collecting available quantities.
The benchmark All Share Index (ASI) dipped by 1% or 69 points to close at 6,389 points, lowest for the year, crossing the previous shallow of 6,434 points suffered on 25 July. Yesterday’s dip brought the year-to-date negative return to 3.73% whilst the Milanka Index was more woeful, down by near 19%.
Around Rs. 25 billion in value was wiped off, though lower in comparison to Rs. 33 billion on Monday as exclusively reported by the Daily FT. The loss of value in October so far reached Rs. 141 billion by yesterday.
The return of bargain hunters was evident as ASI’s eventual finish was better in comparison to over 100 points dip in early trading hours. “Forced selling was witnessed due to the increasing margin calls and panic selling was also witnessed across the board,” NDB Stockbrokers said.
It said the market started on a declining note as yesterday’s negative sentiments continued to prevail.
ASPI witnessed high volatility during early trading hours as more than 100 points were shed.
“Although the market managed to gain some ground during the day through institutional buying, it ended in red by hitting this year’s lowest closing level,” NDB added.
SC Securities said the market conditions continued to “look murky,” whilst noting that panic selling was partly responsible for the downfall as some investors were keen on realising profits whilst others were keen on cutting losses.
DNH Financial said that “it was a choppy day for the bourse” and the “performance was definitely disappointing” whilst Lanka Securities said drifted down further triggered by high level of selling pressure.
“The market continued to slump down, retreating sharply from its mild recovery at open, as selling pressurised by advisors calling into ensure that the margin accounts are brought up to the minimum maintenance level. The day’s price losers outperformed the gainers by 181 to just 29,” Arrenga Capital said in its observations.
An institutional investor told the Daily FT that the market would pick up by Thursday as a fresh round of buying is likely as per new valuations. “With prices having fallen to a more realistic level, fundamental valuations will come to play now. Therefore, timing is right now to buy, though prudently,” Ceybank Unit Trust CEO Chitra Sathukumara said.
DNH Financial said indications are that the market could shed a few more points over the next few days before consolidation sets in. This was notwithstanding exceptionally robust fundamentals both on the economic and corporate front.
“However, with the 3Q2011 results in the offing, we expect selling pressure to gradually ease off in anticipation of a re-rating that would coincide with perhaps one of the strongest 3Q results releases in recent years,” DNH Financial emphasised
Lanka Securities also noted that with ASI witnessing a steep fall to its major support level at 6,250 points there was a potential to bounce back to the positive zone or another steep sell down.
Of the 29 gainers yesterday out of 229 traded companies, Carsons Cumberbatch, Sri Lanka Telecom, Royal Ceramics, Cargills (Ceylon) and Ceylon Tobacco emerged to the sound counters to witness price appreciations, according to Arrenga Capital. The speculative counters filled in the price losers’ list, it added.
Institutions and high net worth individuals were seen taking a bottom fish strategy as sturdy counters such as Buki Darah, Dialog Axiata, John Keells Holdings, Commercial Bank and Carsons Cumberbatch were seen traded. The telcos in specific had moved out of their hibernation period, emerging to be the only sector which gained yesterday.
Premier blue chip JKH continued to remain in the top turnover club for the sixth consecutive day closing at Rs. 198.5 with a decline in price of 0.6%. Overall Diversified Holdings sector was the main contributor to the market turnover. Bukit Darah contributed the biggest turnover of Rs. 90.7 million, which Asia Wealth Management pinned to heavy institutional interest over renewed sentiments towards oil palm.
The Beverage, Food and Tobacco sector also contributed to the market turnover (due to HVA Foods) and the sector index decreased by 0.23%. The share price of HVA Foods decreased by Rs. 6.10 (14.77%) to close at Rs. 35, whilst it saw retail play along with Colombo Land, and the duo accounted for 30% of the turnover.
The manufacturing sector also contributed heavily to market turnover (due to Regnis Lanka) and the sector index came down by 0.68%. The share price of Regnis Lanka decreased by Rs. 15.10 (3.2%) to close at Rs. 469.10.
Continued interest in Dialog Axiata was witnessed as several crossings took place; 10,000,000 shares of Dialog changed hands at a price of Rs.8.10.
Foreign purchases amounted to Rs. 128.8 million whilst foreign sales were Rs. 164.4 million, resulting in a net outflow of Rs. 35 million.
Global markets meanwhile tanked after China posted lower-than-expected economic growth, while Moody’s warned France that it may lower its credit rating amid growing Eurozone debt concerns.
Arrenga said the cautious investor approach had driven Asian markets down from its one-month high whilst European stocks also fell with China reporting a slowest paced economy growth since 2009 and as Germany toned down expectations in ending the crisis.
The MSCI Asia Pacific Index sank 2.5%, marking its biggest slump in two weeks. This was as a result of China’s GDP growth rate falling below expectations to 9.1% during 3Q2011 from 9.5% last quarter.
Market volatility has been triggered with concerns arising on the rosy drawn up for a quick tame of the crisis. More than 11 stocks in the Asian market declined for each that gained today. Investors have been on a very cautious note with Chinese growth rates driving worry on the global economic position.
European stocks retreated from recovery rally as Euro zone debt scene fell back in focus. Euro Stoxx 600 fell 0.8% to 234.33 points at around 3 p.m., local time. Investor participation was further slowed after France was threatened of a rating cut.
Expectations of a complete solution to the crisis at the next weekend summit has remained unanswered, especially with German investor confidence falling to the lowest in almost three years.
http://www.ft.lk/2011/10/19/stock-market-crashes-to-lowest-level-in-2011/
