Peace news brighten up sluggish market

Positive sentiment returned to the market after weeks of absence as both indices were in an upward trend. The upward momentum accelerated on Thursday in the back of reports, that both the Government and the LTTE had reached consensus as to where and when to hold the peace talks. While the indices dropped slightly on Friday Week on Week (WoW) both indices showed a substantial improvement. The ASPI (All Share Price Index) rose by 10.13% or 193.5 points to close the week at 2104.0 points. Meanwhile the MPI (Milanka Price Index) closed the week at 2726.1 points, showing sizable 10.82% or 266.1 point growth compared to last week.

Notable quantities of LIOC shares were seen trading this week amid reports that Rs. 500 million of subsidy dues were paid by the Government to LIOC during last week. Approximately 10.1 million of LIOC shares traded becoming the highest traded stock for the week. The share price appreciated by 8% WoW, with the counter closing on Friday at Rs. 30.50 per share. LIOC traded at a high of Rs. 34.50 per share and a low of Rs. 26.25 per share for the week. The counter contributed Rs. 565.4 million towards weekly turnover.

Blue chip JKH witnessed considerable foreign interest this week as well, with around 6.6 million of its shares trading for the week amid the quarterly results of the company showing a modest growth in its performance.

The major part of 3 million shares, which traded on Monday, was reported to have been bought by US hedge fund Galleon, with the trade going through at a price of Rs. 128 per share. The share was the highest contributor towards weekly turnover contributing Rs. 851.6 million. JKH shares traded within the range of Rs. 149.75 and Rs. 125 per share to close the week on Friday at Rs. 138 per share.

The counter saw its share price improve by 8% WoW. Apart from this renewed interest was observed in NDB and Distilleries shares amid foreign to foreign crossing taking place this week.

Thursday saw 2.79 million shares of NDB being traded with the bulk of the quantities being traded at a price of Rs. 195 per share. The counter closed the week at Rs. 210.25 per share, reaching a high of Rs. 218.50 per share and a low of Rs. 195 per share. NDB was the second highest contributor towards weekly turnover contributing Rs. 565.4 million for the week.

Approximately 4.5 million of Distilleries shares traded for the week, of which the major portion of 2.93 million shares traded on Friday at a price of Rs. 42 per share. The counter traded in the range of Rs. 45 and Rs. 35 per share to close the week at Rs. 43.25 per share.

Telecom sector stocks; Dialog and SLT were amongst the other stocks, which saw sizable quantities changing hands this week. Dialog share price appreciated 8.7% WoW with 9.7 million shares trading during the week. The counter closed at Rs. 18.75 per share with the share price reaching a high of Rs. 19.50 per share and a low of Rs. 17.25 per share for the week. Contribution from Dialog towards weekly turnover amounted to Rs. 179.3 million Meanwhile around 9.8 million of SLT shares traded for the week, contributing Rs. 179.4 million towards weekly turnover.

The counter closed the week at Rs. 18.50 per share, showing a 13.8% rise WoW. SLT traded within the range of Rs. 19.75 and Rs. 16.50 per share for the week.

Activity levels were significantly high this week with the total turnover for the week amounting to Rs. 3.39 billion, showing substantial 121.3% improvement compared to last week. Of this Rs. 1.3 billion came on Thursday, becoming the highest daily turnover level recorded since the November 17 presidential election.

The average daily turnover for the week stood at Rs. 677.8 million. Above stated six stocks (LIOC, JKH, SLT, Dialog, NDB and Distilleries) contributed 66.7% of the turnover, showing that the investor interest was more on the key blue chip counters.

Foreign investors remained net sellers for the week amounting to a mammoth Rs. 696.5 million. Thus foreign sales were higher this week amounting to Rs. 2.1 billion, showing a WoW increase of 99.8%. Foreign purchases meanwhile showed a 55% growth compared to last week to stand at Rs. 1.41 billion. Foreign participation for the week was 51.8% of total activity. LIOC, SLT, Dialog, Sierra and JKH were amongst the highest traded stocks for the week.

Strengthening peace premise to boost investor confidence

The announcement on resuming talks came as a pleasant surprise, as the investors reacted positively to a much-awaited breakthrough in the peace process. Strong international pressure and an increasing wave of violence pressed both parties to return to the negotiation table in view of addressing critical issues in the 4 year long Ceasefire Agreement.

As such, talks will be held during mid-February in Geneva and would focus on the implementation of the truce, which has come under increasing strain recently.

Initial optimism drove the indices during the first three days of trading while the market climbed 146 points on Thursday after the announcement. The interest was skewed towards fundamentally sound blue chips, which contributed heavily towards the weekly turnover. Investors were less bullish on small and mid caps, even though selected profitable counters showed positive momentum.

Stick to fundamentally sound counters in key growth sectors

The overall sentiment is likely to remain positive in the coming days with peace premise strengthening the investor confidence. We believe that the activity levels would continue to improve in the coming days and stay above Rs. 600 million per day on average, as the retail investors are likely to play a more aggressive role compared to last few weeks.

If panic selling dips the indices due to any further violence, we believe that the investors should take this as an opportunity to collect fundamentally sound counters, during the fall. Meanwhile other investors who have already accumulated over the last few weeks at cheap price levels may look for sporadic profit taking in the event of market climbing faster than it warrants. We advise the investors to continue to look for trading opportunities in the coming weeks and stick to fundamentally sound counters in key growth sectors.

This information has been compiled from sources that we believe to be reliable but we do nothold ourselves responsible for its completeness or accuracy. No matter published herein create any liability of any kind of HNB Stockbrokers (Pvt) Limited.