Weekly Market Focus

By Lanka Securities Research

On Monday, Union Bank gathered further steam led retail investors. The bullish trend on Union Bank seemed to have rubbed off on other mid-capped counters such as Colombo Land and Vallibel One. Meanwhile Kegalle Plantations saw a private deal taking place on the normal board. Normally, a sluggish period is seen with minimal activity in the past during the upcoming festivities. But there seems to be a clear reversal this year.

ASI gained 11.44 points (0.2%) to close at 5,777.38 and the S&P SL20 index gained 9.28 points (0.28%) to close at 3,321.81. Turnover was Rs. 398.0Mn.Top contributors to turnover were Union Bank with Rs. 63.6Mn, Kegalle Plantations with Rs. 44.2Mn and Carson Cumberbatch with Rs. 35.6Mn. Most active counters for the day were Union Bank, Vallibel One and Colombo Land & Development.Foreign participation was 8.5% of total market turnover with net foreign inflow of Rs. 34.87Mn.

Profit taking was quite evident on Tuesday as retail investors cashed in before the weekend. Activity on blue-chips remained relatively low which was reflected by a lower turnover. Weligama Properties, a subsidiary of East West Properties announced a private placement with the latter rising by almost 10%. ASI dipped 9.78 points (-0.17%) to close at 5,767.60 and the S&P SL20 index dipped 5.06 points (0.15%) to close at 3,316.75. the turnover was Rs. 399.2Mn.Top contributors to turnover were John Keells Holdings 79.3Mn, Hatton National Bank with Rs. 32.7Mn and Carson Cumberbatch with Rs. 32.2Mn. Most active counters for the day were Union Bank, Vallibel One and Colombo Land & Development. Foreign participation was 26% of total market turnover whilst net foreign buying was Rs. 112.2Mn.

On Wednesday, gains on Sri Lanka Telecom and Nestle helped boost indices whilst retail sentiment also picked up. Turnover levels low with institutional activity on the sidelines. With treasuries holding steady, it will bring a sense of relief to equity investors.

ASI gained 26.70 points (0.46%) to close at 5,794.30 and the S&P SL20 index gained 5.74 points (0.17%) to close at 3,322.49. turnover was Rs. 309.4Mn.Top contributors to turnover were Commercial Bank with Rs. 27.4Mn, National Development Bank with Rs. 25.5Mn and Central Finance with Rs. 23.7Mn. Most active counters for the day were East West Properties, Union Bank and Nation Lanka Finance.Foreign participation was 10.41% of total market turnover with net foreign buying of Rs. 11.4Mn. Retail investor driven activity picked on Thursday whilst institutional activity was seen on mainly banking and financials. Sound investor participation ahead of the festive season is a promising indication of improving sentiment in the CSE. Foreign interest was seen on Hatton National Bank. Foreign interest on blue-chips during the past few months could be held as the main reason for the current revival in the condition of the market. However, retail participation continues at discrete levels. ASI gained 19.07 points (0.33%) to close at 5,813.37 and the S&P SL20 index gained 6.93 points (0.21%) to close at 3,329.42. Turnover was Rs. 940.5Mn.Top contributors to turnover were Hatton National Bank with Rs. 462.9Mn, Commercial Bank with Rs. 103.7Mn and Cargills with Rs. 56.1Mn. Most active counters for the day were Union Bank, Free Lanka Capital Holdings and Nation Lanka Finance. Foreign participation was 39% of total market turnover whilst net foreign buying was Rs. 480Mn.
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The ASI gained 73.94 points WoW to close at 5,839.88 points (1.3%), whilst the S&P SL20 Index gained 21.01 points WoW to close at 3,333.54 points (0.6%).

Indices benefited mainly on the back of the gains made by Vallibel One (8.6% WoW), John Keels Holdings (0.6% WoW), Distilleries Company of Sri Lanka (2.4% WoW), Ceylon Guardian Investments (8.7% WoW) and Nestle Lanka (1.1% WoW).

The final week in the run up to the Sinhala & Tamil New Year saw a marked decline in investor activity compared with the previous weeks at activity at the Colombo bourse as indicated by low turnovers and volumes. Both indices trended upwards for most of the week and ended up in the green.

This maybe a response to the positive sentiment expressed by the ADB in its economic outlook for the economy which also projected a GDP growth rate of 6.8% and 7.2% for 2013E and 2014E respectively.

Interest in the Colombo bourse may be sustained given the Central Bank’s objective of lowering borrowing costs by May-June which would make equities more attractive from a valuation perspective.

However, the ADB cautions that the BOP deficit and the increasing share of foreign borrowing poses the most significant challenge towards the future growth prospects of the economy.

Banking & Finance sector counters continued to command institutional interest with firms such as Hatton National Bank, Central Finance Company and Pan Asia Bank benefitting from crossings over the week.

Furthermore, Panasian Power, Free Lanka Capital Holdings, Dialog Axiata, Seylan Merchant Bank (Non-Voting) and Seylan Merchant Bank topped the list in terms of volume traded during the week.

The week saw foreign purchases amounting to LKR 885.3 mn whilst foreign sales amounted to LKR 230.8mn. Market capitalisation stood at LKR 2,237.3bn, and the YTD performance is 3.5%.

Conclusion: Bourse fairly buoyant despite the festive season

The mood at the Colombo bourse remained fairly buyout despite the upcoming festive season, driven by high institutional and foreign activity. The performance of the indices was especially a welcome on the heels of the Central Bank’s assessment of the economy for 2012 as well as the positive comments mentioned in the ADB’s Asian Development Outlook for 2013.

World stocks also demonstrated strong performance lifted by a surprise drop in US unemployment figures and the Bank of Japan’s aggressive monetary policies in an attempt to beat continuous deflation witnessed in the country. Further, the improvement witnessed in the China’s imports of key commodities in March also propelled the world stock markets to high levels. Reaffirming this, MSCI world index gained 2.5% WoW to close at 1,462.8 as at Thursday reaching a 5 year high, while the S&P 500 also climbed to record levels during the week since 2007. Most frontier markets also made gradual recovery in tandem with the movement in the world indices. Furthermore, the performance of equities has made the investors to shift away from safe heaven assets.

In the context of Colombo Bourse, investor’s focus in the coming weeks would increasingly turn towards 1QCY2013 earnings results of the corporations. Furthermore, treasury secretary’s statement regarding the possible easing of market interest rates from May and June 2013 is likely to draw investor attention more towards the bourse.
Source: Asia Wealth Management Research