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| Monday, 3 January 2005 |
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HNB Stockbrokers' weekly market review Market remains resilient amid tidal terror The market crashed on the first day of trading on Tuesday, after the tsunami attacks. The devastation, which occurred on Sunday, saw colossal damage to infrastructure and also struck a blow to the hospitality industry, which was expecting a bumper season. The market remained closed on Monday to allow investors time to assess or at least grasp the extent of damage caused to the economy and to an extent mitigate panic selling. However when the market opened on Tuesday both indices fell sharply. The ASPI (All Share Price Index) declined by 68.2 points to stand at 1504.4 points, while the MPI (Milanka Price Index) declined by 141.7 points to stand at 2067.3 points on Tuesday. The main decliners on Tuesday understandably were Hotel sector counters, as the sector was severely impacted, with the coastal line being a favorite tourists destination . Nevertheless the market showed its resilience, with indices picking up on Thursday. The market closed on Friday with the ASPI standing at 1506.9 points down by 65.6 points or 4.18%. Meanwhile, the MPI closed at 2073.7 points dipping 135.3 points or 6.12%. The total turnover for the week was a mere Rs.575 million, compared to the staggering turnover of last week, which stood at Rs.1.92 billion, showing a 70% decline from last week. The resulting average turnover for the week was Rs.143.9 million. Lanka IOC (LIOC) remained the star of the week with approximately 6.5 million shares trading and contributing around Rs.279.1 million to the week's turnover. However the amounts traded was a fraction of the quantities, compared to the previous week's trading, where approximately 23.3 million, of LIOC counters exchanged hands. The counter saw an initial dip in price on Tuesday as trading opened, however the share price appreciated, with reports of little damage to LIOC's property and its future operations. The counter closed the week at Rs.43.25. Apart from LIOC, Nawaloka counters were seen being heavily traded with approximately 3 million shares trading throughout the week. The counter contributed around Rs.9.7 million towards the week's turnover, closing the week at Rs.3.25 per share. The week saw foreign investors being net buyers, standing at Rs.71.7 million. The foreign purchases for the week was Rs.111.1 million, down by 75.9% compared to last week. While, foreign sales for the week were also down standing at Rs.39.4 million, showing a substantial decline of 90.5% compared to last week. The Foreign participation for the week was 13.1% of total activity, compared to last week's level of 22.8%. Among the most traded stock for the week were LIOC, Nawaloka, JKH, Vanik Incorporated and Telecom. Tsunami waves still float in market Market activity remained low last week, as the investors were still recovering from the Tsunami shock that devastated Sri Lanka's Southern and Eastern coastal areas. However, we believe that the impact on the economy is not as bad as what is visible in causality levels. Focus on redesigning affected areas However we feel that the exact information on the magnitude of the damage may not be available for weeks, but the relief and damage control measures are likely to cost at least Rs.4 - 5 billion to the government immediately. Meanwhile, we believe that the government should convert this to an opportunity to rebuild these affected areas to new heights and standards, using the international support and already established plans. In our opinion, some of the planned but stalled, road construction projects such as Southern High Way etc. should kick start immediately, with clear strategic planning. Damage may exceed original projections Political sources have indicated that the total cost of rebuilding would be as high as Rs.100 billion. However we feel that this takes into account the total replacement cost and not the size of the damage. In our opinion a cost of this scale could be incurred over a period of time to rebuilding 600km of roads, 200km of railways, 250,000 houses etc. Chances of war further distant It is clear that both government and the LTTE may not be in a position to focus on war in the near term, as the attention is now deviated towards rebuilding the nation. Market activity to improve We expect more investors to return to the market this week, after the holiday season and the shock of Tsunami. This will improve the market activity levels and create additional demand for selected sectors and stocks. While companies considerably exposed to the tourism, fisheries and agriculture may get a beating, we expect the construction, healthcare and energy sector to be in investor demand. We advise the investors not to engage in panic selling, but instead to carefully look at the sectors and stocks, which are beneficiaries from this devastation. Furthermore we alert the investors to take advantage out of further panic selling, if any, in order to capitalize on trading opportunities. |
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