|
|
 |
 |
 |
| Monday, 17 January 2005 |
 |
|
 |
Business | |
| News Business Features Editorial Security Politics World Letters Sports Obituaries
|
HNB Stockbrokers' weekly market review: Market holds steady in the back of rising donor pledges With investor confidence on the up side market remained steady, however indices fell on Tuesday due to profit taking but managed to bounce back on Wednesday and Friday. Both indices closed up slightly from the previous Friday's closing levels. The ASPI showed an increase of 6.6 points or 0.4% to close at 1574.7 points. While, the MPI rose considerably by 28.6 points or 1.3% to close the week at 2171.1 points. Apart from construction and healthcare related sectors, a considerable amount of interest was also seen in the diversified sector. The week's total Turnover was Rs. 1061.5 million. Comparing the daily average turnover level for the week, which stood at Rs.265.38 million, to the daily turnover level of the previous week, which was Rs.425.34 million, a 37.6% decline week on week can be identified. Lanka IOC (LIOC), Nawaloka and Royal Ceramics took center stage with high volumes trading for the week. Approximately 7.9 million of LIOC shares traded for the week at a high of Rs.50.50 and a low of Rs.47.75 per share. While, approximately 4.7 million and 6.2 million respectively, of Nawaloka and Royal Ceramics counters traded for the week. Price appreciations were seen in Diversified sector counters such as JKH, Aitken and Spence and Hayleys for the week. JKH saw it's price appreciate by 4.3% compared to last Friday's price level, to close the week at Rs.120.25. While, approximately 636,000 shares were seen trading for the week. Aitken and Spence share price rose by 3.5% to close at Rs.365.25 and Hayleys saw it's share price appreciating by 3.3% to close the week at Rs.134.25. Apart from this, Dipped products also saw it's share price appreciating on the back of a 1 for 1 bonus issue which was announced on Wednesday. The share price rose by approximately 38.8% to stand at Rs.159.25 at close ofweek on Friday. Foreign investors remained net buyers for the week amounting to Rs.72.7 million. This came as result of foreign purchases, which amounted to Rs.237.4 million (consisting mainly of LIOC and JKH foreign party trades) and foreign sales, which, amounted to Rs.164.7 million. Meanwhile foreign participation for the week stood at 18.9% of total activity. Among the heavily traded stock for the week were, Nawaloka, LIOC, Royal Ceramics, Blue Diamonds and CF Venture fund. Stick to the fundamentals As expected by us the market went through a minor correction last week, breaking a continuous upward movement during the previous week. Both indices confronted with stiff upward resistance, as some investors booked profits during the early part of the week. However market experienced renewed buying interest towards the end of the week, showing signs of an end to profit taking. We expect more buying pressure towards fundamentally sound counters in the coming weeks, as some of the macro economic indicators signaling signs of improvement aftermath of post Tsunami development. We therefore advice the investors to look for counters with sound fundamentals, to take advantage of the anticipated economic growth. Economic Round up- January 2005 Policy rates maintained at the same levels As per the latest Monetary Policy Review in January the policy rates have been kept unchanged. Thus the Repo and the Reverse Repo rates remain at 7.50% and 9.00% respectively. With the last rate increase coming in November, 2004 and the inflation still on the rise, we mentioned that another rate hike is likely during early part of this year. Nevertheless with the recent tsunami the total macroeconomic set up has changed. The main argument for a further rate hike was on
the demand pulled inflation, but nevertheless any interest rate increase would come at the expense of economic growth. The growth in the tsunami hit areas expected to slow down and much rebuilding work on the cards, any stimulus for growth would be a positive move at this point of time. Furthermore part of the foreign aid (USD15m) that has been received as well as sentiment on the total moneys that were pledged have strengthened the rupee to bring it to Rs. 98.32 (13/01/2005). The strong rupee would ease some pressure off the import bills and the resultant inflation and tones down the case for a further rate hike in order to control the demand pull. Thus the rates have been kept at the present levels in order to induce the growth and economic activity. Central Bank may intervene if the dollar falls below Rs.98. The 6% appreciation in the rupee since the beginning of 2005 has put pressure on the exporters since their margins/ competitiveness is affected in the world market. Thus the central bank may have to intervene if the rupee strengthens beyond 98.00 levels against the USD when bigger blocks of foreign aid are received. During the recent times the foreign reserves of the country had fallen as well and this would enable the reserves to be accumulated again. Economic Growth is expected to slow in 2005 Our 2004 full year GDP forecast is 5.4%. The 3Q, 2004 cumulative growth has been 5.5% and our Q4 forecast is at 5.0%. Looking forward at 2005 in the aftermath of the tsunami attack, the growth prospects for 2005 is expected to start off slow with the initial impact taking it's toll on the economy but would pick up towards the end. The full year growth is estimated at 4.9% with Q1 to Q4 reaching 3.6%, 4.4%, 5.3% and 5.9%. The initial slow down coming from the hotel, fisheries and agricultural sectors while the subsequent growth is driven by construction, manufacturing and the banking sectors. Fiscal deficit may widen The relief measures and the reconstruction process of the Tsunami devastation are likely to increase the government expenditure by a reasonable margin, thus further widening the budget deficit. Central Bank in its initial estimates indicated that the cost on the economy due to the Tsunami to be in the range of Rs.130 - Rs.150 billion (US$1.3 - 1.5 billion). However it is likely that the donor funds and aid may fund bulk of this mammoth fund requirement, but we envisage at least 15% -25% having to be supported by the treasury. |
|
News | Business | Features
| Editorial | Security
Produced by Lake House |
