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The Market maintained its bullrun as the ASPI rose by 28.9 points or 4.11% to close the week at 732.5 points. The blue chip Milanka Price Index was 62.96 points up from last Friday's close of 1229.14 points closing the week at 1292.1 points. The market was full of activity throughout the week as the turnover for the four-day week amounted to Rs.1.25 billion. This constituted an average daily turnover of Rs. 313.07 million for the week, while Thursday being a holiday.

It was yet another week dominated by foreign purchases as it contributed to 59% of the weekly turnover. The week recorded a net foreign inflow of Rs. 243.24 million with Raj Rajaratnam contributing to most of it.

Healthy interim results lead to further blue chip buying with Caltex Lubricants, CTC, Aitken Spence, HNB and Richard Pieris were among those companies reported improvements. Caltex Lubricants net profits up by 36% during the first six months, predicts profit growth of 35%-40% in FY2002.

Caltex Lubricants Lanka announced a 36% rise in net profit in the six months to June 30 at Rs. 386.6 million. The revenue was up by 11% at Rs. 1.9 billion in the period under review, compared to Rs. 1.7 billion in the first six months of 2001.

Improvements were shown in all areas with the operating profit increasing by 23% and profit before tax by 25%, when compared with the corresponding period of 2001.

"We'll probably be maintaining the same growth level (as in the first half), or do slightly better if the environment doesn't change. We should see full-year net profit up around 35%-40% over last year", Kishu Gomes, the company's managing director said.

With the latest results the Annualised EPS rose to 25.78 and the market reacted significantly as the market price jumped up by Rs. 5.25 immediately. The share closed the week at Rs.114, Rs.10.25 up from last Friday's close. Lubricants still remains attractive in the market with a Price earnings ratio of 4.4 times.

HNB records healthy pick up in profits

Sri Lanka's largest private bank released its results for the first six months of the year with a 34% increase in net profit to Rs. 174.7 million. However, the group profits declined by 9% to Rs. 36.6 million due to losses incurred by its subsidiaries Sithma Development, Smart Development and HNB Assurance. Nevertheless its subsidiaries HNB Securities and HNB Stockbrokers posted healthy results. HNB Securities reported a net profit of Rs. 16.0 million due to fall in interest rates while HNB Stockbrokers also reported a net profit of Rs. 12.6 million owing to high level of activity on the Colombo stock market. The prevailing low interest rate regime helped the bank to increase its net interest income by 34% to Rs. 1.3 billion. HNB's loans and advances grew by 10% to Rs. 68.6 billion while the implementation of HATNA.NET led to a healthy increase in deposits by 10% to Rs. 32.8 billion.

Meanwhile, the bank debenture issue, which is to be listed on the second board of Colombo bourse, is expected to raise Rs. 1.5 billion initially while another Rs. 5.0 billion is on the cards in case of an over-subscription. This would help HNB to raise its Tier II capital adequacy ratio to 11.0% from the current 9.53%. Meanwhile, the construction of its Head office building (Sithma Developments) is expected to be completed by the end of 2002 while the upcoming debenture issue would be utilised to reduce its exposure to Sithma.

CTC reports healthy growth in profits for the 1st half

CTC's net profit for the first six months increased by 25% to Rs. 425.0 million due to increase in turnover, lower staff costs and lower tax charges. The company recorded a marginal 2.3% growth in turnover mainly driven by a 9% increase in export volumes. Local volumes too saw an improvement due to excise duty restructure in the lower segment of the market, which resulted in 30% of the "illicit white cigarette" market shifting to duty paid segment. The removal of surcharge on corporate tax coupled with tax concessions given to it recently established fully owned subsidiary Advent International Ltd. helped its bottom lines with a 17% drop in tax burden.

Aitken Spence improves results during 1st Quarter

Continuing its strong recovery from its dip in the profits of 2001, Aitken Spence reported an excellent growth in profits for the 1st quarter ended 2002. The gross revenue increased by 16% to Rs. 1.4 billion compared to the corresponding period of 2001. Profit from operations grew by 48% to Rs. 107.0 million due to decline in operating expenses by 23% from the figures of the 1st quarter of 2001. Profit after taxation increased by more than four-fold to Rs. 49.3 million, however, a higher payment of minority interest led to a 55% increase in net profit attributable to shareholders to Rs. 42.56 million from Rs.27.38 million during the first quarter of 2001.

Rajaratnam continues his interest in blue chips

Raj Rajaratnam, the Sri Lankan born fund manager based in New York, continued to pick up shares in blue chips, throughout the week.

On Tuesday he became the third largest shareholder in Hayleys by purchasing 2.8 million shares or a 7% stake at Rs.150 per share. The total transaction amounted to Rs.420 million and comprised 67.3% of the day's turnover.

The following day he picked up 1.2 million shares of Commercial Bank at a premium price of Rs.225 and became the largest individual shareholder of the countries premier bank. The purchase of the 3% stake for Rs.270 million increased his personal holding to more than 5% and enabled Commercial Bank share to trade at Rs.225, highest since 1994.

It was widely speculated that Rajaratnam is now eyeing NDB, Tokyo Cement and Sampath Bank. Looking at the improved earnings, low price earning ratios and high book values, this speculation could soon be a reality. Last week Rajaratnam justified his investments saying, " I'm betting on the peace dividend in Sri Lanka, the Price Earning (PE) ratio of the market and the companies relatively to the other markets are very low and has great prospects".

The market reacted on speculation as, Sampath Bank share rose by Rs.9.00 to Rs 79.00 at one stage, while NDB and Tokyo Cement traded at a high of Rs.93.25 and Rs.92.50 respectively.

President's letter to Parliament boosts investor confidence

Equity investors, back in Colombo bourse since dates for Lanka-LTTE peace talks set last week, were given further encouragement and comfort from President Kumaratunga's statement on Tuesday that she wasn't planning to dissolve Parliament and call fresh elections. Any such move would scuttle peace efforts of the government and with the latest statement, investors may rest assured of political stability at this crucial juncture.

US Deputy Secretary of State comforts investors

US Deputy Secretary of State Richard Armitage arrived in the island on Wednesday, adding another positive factor to the already awakened market.

"We are on the verge of re-energising our relationship with Sri Lanka", he said. "Right beneath the surface also is support in defence, training, commerce, treasury and justice". These words were a tower of strength to many investors who were hesitant to get into the market. "I am here to physically demonstrate the US support for this process toward peace", Armitage said. The US support no doubt helped the bullrun to continue as the market recorded the third highest turnover of the year on Tuesday.

Point of view:

Over the last two weeks the ASPI picked up by 61.3 points and just 6.4 points away from the highest figure of the year. It looks as if the market is getting close to a peak but the events to come in the near future may decide the outcome.

It is quite certain that Rajaratnam has not exited the market. His confidence in the local bourse should encourage more foreign fund managers to commit fresh funds. The participation of the retail investors is also an encouraging factor. Political stability will be another area to be monitored closely as the President is expected in the country during the week. If the LTTE ban is lifted, this will be a positive sign towards peace talks, which most investors are seriously concerned of.

Looking at these factors a slight dip during the early part of the week as a market correction could not be ruled out, but it will not last long since the investors should start picking up shares moment the prices becomes attractive.

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