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| Monday, 31 January 2005 |
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HNB Stockbrokers weekly market review Market remain bullish The market remained on a bullish spree, for another week running with market indices rising to new levels. The ASPI (All Share Price Index) touched 1649.8 points on Friday reaching a peak, showing an increase of 40.4 points or 2.5 per cent from the previous week's levels. The MPI closed at 2264.1 points, despite a marginal dip on Friday, up by 30.9 points or 1.4 per cent from the previous week's closing levels. The week's total turnover, was Rs. 1.48 billion, which showed an increase of Rs. 124 million or 9.2 per cent compared to the previous week's sales levels. The average daily turnover stood at Rs. 369.8 million. LIOC share price was appreciated sharply during the week touching Rs. 54.50 on Friday, before closing the week at Rs. 53.25 up by 5.4 per cent, compared to last Friday's closing levels. Approximately, 8.12 million LIOC shares were traded during the week. Apart from LIOC a considerable amount of SLT shares were seen trading amounting to approximately 3.35 million. The investor interest on Nawaloka shares did not seem to lessen, as the counter managed to be within the top volumes traded for yet another week. The week saw approximately 2.32 million of Nawaloka shares trading, while the counter closed at Rs. 3.75 per share. Interest was also seen in hotel sector counters with Eden Hotels and Fortress Resorts both seeing a considerable amount of shares trading. Approximately 943,900 million of Eden hotel shares traded for the week; while on Friday approximately 1.63 million of Fortress Resorts stocks exchanged hands. Investor interest towards JKH counters continued, with approximately 791,900 shares being traded during the week. The counter closed the week at Rs. 129 per share. Foreign purchases for the week stood at Rs. 426 billion, showing 90.7 per cent increase from last week's levels. While foreign sales saw a substantial drop of 57.2 per cent , compared to last week to close the week at Rs. 261. Resulting in a Net foreign inflow of Rs. 165 million. Foreign participation stood at 23.2 per cent of total activity. Heavily traded stocks for the week were LIOC, Blue Diamonds, Distilleries, SLT and Nawaloka. Overall trend to remain positive despite profit taking Market activity remained positive last week, despite profit taking in selected counters. It is evident that investors are looking to taking profits at different price levels, specially on the banking counters, which are seeking a surge in stock price after a long period. Therefore we feel that the blue chips would be confronted with upward resistance at various price levels due to profit taking. However, we expect the overall positive trend to continue in the market in the short run with some volatility in the indices. Furthermore it is likely that the medium to long-term market behaviour would be influenced by the actual implementation of the post Tsunami development work. Global oil prices to remain neutral After a continuous upward movement the oil prices eased to $48.42 on Friday from US$49.75 recorded on Tuesday, after the planned Nigerian oil sector strike was called off. Furthermore the market remained optimistic that there would not be any proposal to reduce oil production at the OPEC meeting scheduled for this weekend. We expect the oil prices to remain highly volatile in the coming months. The oil prices would remain responsive to factors causing disruption to the supply of oil, thus fluctuating the prices in a wide range of $43-$60 per barrel, in the medium term. With much of the needs for strong winter already factored in and a possibility of a favourable outcome at the OPEC meeting, we expect the prices to remain neutral in the coming week. Caltex remain unshaken With the agreement with CEPETCO to exclusively market Caltex lubricants through it's filling stations, coming to an end in July 2004, the company was faced with new challenges to capture distribution networks. A recent company visit indicates that the company is aggressively looking at new business opportunities and consolidating its strengths to retain the existing market share. As part of it's initiative to capture distribution channels, Caltex has managed to enter into exclusive agreements with many service stations islandwide, who now act as their agents in marketing Caltex's lubricant products. As part of its cost reduction strategies, Caltex has outsourced its ancillary activities to 3rd parties, concentrating only on core activities. Apart from this the company has also attempted to stream line its supply chain by trimming the levels in between the, canning of lubricants to the distribution. We believe that these restructuring moves would have a favourable impact on company's cost structure. The company has also maintained a voluntary retirement scheme (VRS), which has enabled the reducing number of employees to approximately 125 at present. The FY2004 has not been a fruitful year for Caltex, with many adverse factors affecting its bottom line. The substantial depreciation in the rupee against the dollar, unexpected rise in global oil prices and the considerable reduction in finance income (due to the absence of a substantial portion of the company's short term investments after the heavy dividend payment) were among the reasons for an projected 17.3 per cent dip in net profits during FY2004. However the appreciation of the rupee and coming down of oil prices will enable the company to record an improved performance during FY2005. |
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